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Financial Planning > Behavioral Finance

Southeastern Fights AXA FinancialMONY Deal

By Allison Bell

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NU Online News Service, Jan. 23, 2004, 11:06 a.m. EST – A Southern money manager is trying to launch a proxy war against efforts by AXA Financial Inc. to acquire The MONY Group Inc., New York.[@@]

Southeastern Asset Management Inc., Memphis, Tenn., says it will be voting its clients’ MONY shares against the AXA Financial offer. Southeastern also has submitted a shareholder proposal that calls for MONY’s board to evaluate whether a change of management would benefit shareholders.

The Longleaf Partners Small-Cap Fund and other Southeastern clients own about 4.7% of MONY’s outstanding shares, Southeastern says.

AXA Financial, New York, a unit of AXA S.A., Paris, has agreed to pay $31 per share for MONY. MONY has scheduled a Feb. 24 special shareholder meeting. Shareholders can vote on the AXA Financial offer by mail or at the shareholder meeting.

Southeastern and some other money managers point out that MONY has a reported book value of $41.68 per share. The $31-per-share offer “gives no credit to the company’s distribution network or brand name,” according to Staley Cates, Southeastern’s president.

Southeastern also notes that AXA Financial has agreed to pay senior MONY managers severance payouts with a value of about 6% of the $1.5 billion that shareholders would receive. Cates describes the severance arrangement as a possible conflict of interest.

In most comparable deals, the buyer agrees to pay senior managers total severance equal to about 1% to 1.5% of what the shareholders will receive, Cates says.

Southeastern says it has talked to Robert Devlin, the former chairman of American General Corp., Houston, about the possibility of Devlin taking over as head of MONY. Devlin could be not be reached for comment.

Southeastern says it has hired Innisfree M&A Inc., New York, a proxy solicitation firm, to help it communicate with MONY shareholders about the Feb. 24 shareholder vote.

MONY has responded by arguing that AXA Financial has offered a fair price for MONY.

“The fact that no other party has come forward since the announcement of the proposed transaction with an offer greater than AXA Financial’s $31 further reinforces this fact,” MONY says.

MONY notes that some securities analysts have suggested that the company’s stock price could drop into the mid $20s if the AXA Financial deal falls through.

MONY suffers from a lack of scale, reduced fee income, a poor earnings outlook, the threat of ratings downgrades and the same challenging environment facing life insurers of all sizes, MONY says.

“Southeastern fails to explain how a change in management would address any of these factors,” MONY says. “Furthermore, an abrupt change in management would likely exacerbate these risks and substantially undermine MONY’s ability to maintain the value of its franchise and the integrity of its distribution system in an already uncertain environment.”

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