Some Money Managers Pan AXA/MONY Deal

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A day after AXA Financial Inc. agreed to pay $1.5 billion for The MONY Group Inc., some money managers said the price was too low.

The deal price amounts to $31 per share, which would give shareholders a premium of 32% over the 1998 initial public offering price. The stock closed at $29.33 at end of day Sept. 17.

MONY reported $21 million in net income for the second quarter on $605 million in revenue and $55 billion in assets.

New York-based AXA Financial, the U.S. arm of AXA S.A., Paris, would get Advest Inc., Hartford, a major regional securities broker, along with a life insurance company founded in 1843.

The deal would make AXA Financial a player in life insurance wholesaling and give it access to MONYs impaired risk and corporate-owned life insurance products.

MONY has 1,300 career agents, and MONY agents closely resemble AXA Financials 5,000 agents, according to AXA Financial President Christopher Condron.

“Theres a very good and logical fit, and MONY is strong in some high-growth areas where we are not so strong, such as San Francisco, Salt Lake City and Phoenix,” Condron says.

If AXA Financial completes the deal, “our distribution systems gain critical mass,” says MONY Chairman Michael Roth.

Analysts in the Chicago office of Fitch Ratings say they probably will raise their A+ insurer financial strength ratings on MONYs insurance units one or two notches if the deal goes through.

The deal is subject to shareholder approval, however, and money managers attacked it during a conference call MONY and AXA Financial held to discuss the deal.

“We think the price is ridiculously low, and well certainly vote against it,” said G. Stanley Cates, president of Southeastern Asset Management Inc., Memphis, Tenn., a fund manager that owns 4.9% of MONYs stock.

David Keller, another money manager, said the price amounts to only 72% of MONYs tangible book value of $43 per share. Roth told Keller that the book value figure includes $17 in deferred acquisition costs that are not really very tangible, but Keller and other money managers complained that the ratio of the deal price to book value is much worse than the deal price-to-earnings ratio because MONYs earnings have been weak.

Several other money managers said MONY should maximize shareholder value by holding an auction.


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 19, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.