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Financial Planning > Behavioral Finance

Money Managers Attack MONY Deal Price

By Allison Bell

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NU Online News Service, Sept. 18, 2003, 12:15 p.m. EDT – Money managers and buy-side analysts are attacking the $1.5 billion price that AXA Financial Inc., New York, has agreed to pay for The MONY Group Inc., New York.

AXA Financial, a unit of AXA S.A., Paris, will be assuming more than $850 million in debt, and Stanley Tulin, chief financial officer at AXA Financial, said today at a teleconference held to discuss the deal that meeting AXA’s goal of a 15% return on equity will be difficult.

“Right now, we can’t do that,” Tulin said. “[ROE] would grow over time as the synergies grew.”

AXA Financial does not believe that MONY has any excess capital, Tulin added.

AXA Financial President Christopher Condron responded to criticism of the price by saying the success of the deal will depend on AXA Financial’s ability to make it work.

“We don’t see this as a slam dunk,” Condron said. “We don’t see a windfall here.”

But MONY faced outrage from shareholders such as G. Stanley Cates, president of Southeastern Asset Management Inc., Memphis, Tenn.

Southeastern is a fund manager that owns 4.9% of MONY’s stock.

“We think the price is ridiculously low, and we’ll certainly vote against it,” Cates said.

The deal price amounts to $31 per share. MONY executives said the deal would give shareholders a premium of about 10% over the average share price for the past 30 days and a 32% premium over the 1998 initial public offering price.

Cates and several other deal opponents said the ratio of the deal price to book value looks far worse than the price-to-earnings ratio because weak management has held down MONY’s earnings.

David Keller, president of Advisory Research Inc., Chicago, said the price amounts to only 72% of MONY’s tangible book value of $43 per share. But Roth told Keller that the book value figure includes $17 in deferred acquisition costs that are not really very tangible.

Several deal opponents said MONY should have put itself on the auction block before accepting an offer.

MONY has posted a sound recording of the conference call in the Investor Relations section of its Web site, at http://www.mony.com

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