NU Online News Service, Oct. 13, 2003, 3:25 p.m. EDT – Cutting $125 million from annual expenses at MONY Group Inc., New York, might sharply increase the value of the company, according to Credit Suisse First Boston, New York.
AXA Financial Inc., New York, a unit of AXA S.A., Paris, announced in September that it has agreed to pay $1.5 billion, or $31 per share, for MONY.
Some large institutional shareholders complained bitterly about the price, arguing that the price reflected MONY’s soft earnings but failed to reflect the company’s high book value.
MONY has hired Credit Suisse to issue an opinion about the fairness of the AXA Financial offer. MONY summarizes the Credit Suisse analysis in a preliminary proxy filed with the U.S. Securities and Exchange Commission.
Credit Suisse investment bankers analyzed MONY’s value by looking at what acquirers have paid for other large U.S. insurance companies since 1997.
Credit Suisse also came up with a value based on discounted cash flow from 2003 to 2007. The firm added the dividends MONY expects to pay from 2003 to 2007 to a “terminal value” for 2007.
Valuing MONY using price-to-earnings ratios paid in comparable deals gives a range of only $18.95 to $21.32 per share, and using the price-to-book ratios gives a range of $27.11 to $33.13 per share, according to the MONY summary of the Credit Suisse analysis.
The range for an average of the earnings-based price and the book value-based price is $23.03 to $27.22 per share, according to the analysis summary.
Credit Suisse gives a range of $19.23 to $25.25 for a price based on discounted cash flow analysis using current financial projections.
But, if an acquirer could cut MONY’s expenses $62.5 million during the first 12 months after the acquisition and $125 million per year thereafter, discounted cash flow analysis shows MONY would have a value of $27.86 to $36.47 per share, according to the MONY summary of the Credit Suisse analysis.
Other items from the preliminary proxy:
- Lawyers have filed 10 purported class actions objecting to the deal price in a state court in New Castle County, Del., and two purposed class actions objecting to the deal price in a state court in New York City. “MONY intends to vigorously defend the actions,” MONY says.
- MONY has agreed to pay AXA Financial a cash termination fee of $50 million if it terminates the merger agreement with AXA Financial to take a better offer.
MONY has posted a copy of the preliminary proxy at http://www.mony.com/InvestorRelations/ProxyWebsiteVersion.pdf