BBC Homepage World Service Education
BBC Homepagelow graphics version | feedback | help
BBC News Online
 You are in: Business
Front Page 
UK Politics 
Market Data 
Your Money 
Business Basics 
Talking Point 
In Depth 

Thursday, 8 February, 2001, 08:24 GMT
GE Capital ups Equitable offer
Graphic of company logos
Three's a crowd as GE makes a counterbid for Equitable
GE Capital, the financial services arm of the world's largest company, has increased its offer for the troubled mutual life assurer Equitable Life.

The move comes days after James Crosby, chief executive of Halifax, and Chris Headdon, chief executive of Equitable Life, shook on a 1bn ($1.4bn) deal.

Halifax, Britain's largest mortgage bank, agreed on Monday to buy part of Equitable's operations for up to 1bn, promising some relief for thousands of pension policy holders in Equitable's ailing life fund.

Equitable's seven-month search for a buyer finally looked set to end.

But on Thursday, it appeared that GE was not going to give up Equitable without a fight as reports of an improved counter-bid re-surfaced.
GE counterbid
Improvement on previous 1.2bn bid
Salesforce would be sold to AMP
GE may reopen life fund
Equitable HQ could become third-party adminstration centre

Earlier the US company had failed in a previous attempt to win over Equitable's management with a proposal worth 1.2bn.

GE has declined to comment on the new offer, although a source close to the company said it will likely be higher than 1.2bn and could include less conditions for Equitable.

Equitable rejected the bid because it was partly loan-based, whereas Halifax was offering hard cash.

No details of GE's revised offer have yet become public.

However, the Financial Times newspaper reports that GE has secured a side-deal with AMP, the Australian insurer, to sell on Equitable's 450-strong sales force, which the US group does not want.

Halifax's bid

Halifax's 1bn bid includes two different stages.

It plans to pay 500m to acquire Equitable's economic interest in its non-profit and unit-linked business, its operating assets - including IT and an administration platform - and sales force, which will be re-branded The Halifax Equitable.

In a second stage, Halifax will pay a further 500m if holders of the disputed policies back the deal.

James Crosby and Chris Headdon
James Crosby of Halifax (left) agrees a deal with Equitable's Chris Headdon

Half of that sum would be unconditional, while the latter part would be contingent on the achievement of new business sales and profitability targets for the sales force.

Halifax would have no exposure to Equitable's troubled with-profits fund, which is closed to new business and remains mutually owned by its policyholders.

Equitable's Mr Headdon said there was a "strong incentive" for holders of the disputed policies, the so-called guaranteed annuity rate plans, to support the takeover.

The deal was also backed by City watchdog the Financial Services Authority, which has been closely monitoring the Equitable's progress in meeting its obligations to policyholders.

But the policyholders have not yet agreed to the deal and will not vote until autumn this year.

They must agree to relinquish some of the future benefits of their schemes in return for a one-off payment to top up their policies.

GE's previous bid

GE had proposed in its initial offer to pay 400m for the same Equitable businesses that Halifax is buying.

But 175m of that was conditional on the retention of the sales force and on meeting certain fund management targets.

GE also offered a 750m loan at market rates contingent on the settlement of the GAR policies.

While Halifax intends to keep the Equitable's 26bn life fund closed, GE said that it would re-open the fund.

GE also planned to turn Equitable's headquarters in Buckinghamshire into a third-party administration centre.

Search BBC News Online

Advanced search options
Launch console
The Equitable Life faces closure after losing a High Court case

The story so far

See also:

05 Feb 01 | Business
Halifax seals Equitable Life deal
05 Feb 01 | Business
Rival offer for Equitable
29 Jan 01 | Business
Equitable 'rescue' talks collapse
Internet links:

The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.

E-mail this story to a friend

Links to more Business stories