Shareholder pressure has pushed The MONY Group Inc., New York, and AXA Financial Inc. to change the terms of their merger agreement.
In September 2003, AXA Financial, a New York-based unit of AXA S.A., Paris, agreed to pay $1.5 billion, or $31 per share, for MONY, and to pay MONY managers about $90 million in “change in control” compensation.
In response to critics complaints about the CIC package, members of MONYs senior management team have agreed to give up $7.4 million of the $90 million to fund a special, post-acquisition dividend for MONY shareholders, which, MONY says, would amount to 10 cents extra per share.
MONY shareholders can vote against the deal, and they also have a right to slow the acquisition process by voting to demand an independent appraisal of their shares.
Originally, AXA would have had the right to walk away from the deal if more than 10% of the MONY shareholders had voted against the deal, MONY says. Now, thanks to pressure from deal opponents, shareholders have broken through the 10% appraisal demand threshold, MONY reports.
“Currently, appraisal demands have been received from stockholders purporting to own approximately 13.7% of the outstanding shares as of the date of their demands,” MONY says.
AXA Financial has responded by agreeing to increase the appraisal demand walk-away threshold to 15%, MONY says. If owners of more than 15% of the MONY shares demand appraisals, AXA Financial can choose between closing the transaction, going through an appraisal process or walking away from the deal, MONY says.
The date of a special shareholder meeting to complete voting on the deal has been pushed to May 18, from Feb. 24.
MONY postponed the meeting because a Delaware state judge recently ruled that the company must give MONY shareholders more information about the compensation package for senior MONY managers.
AXA Financial President Christopher Condon put out a statement emphasizing that his company remains committed to completing the MONY deal.
“We have agreed to amend the merger agreementincluding the new limitations on the appraisal rights condition, as part of our commitment,” Condon says in the statement.
Moodys Investors Service, New York, says the postponement of the shareholder meeting could end up affecting the A2 insurance financial strength ratings that the rating agency has assigned MONYs main life subsidiaries.
MONY “is concerned that the longer the merger process takes, the greater the likelihood that MONY will develop problems related to its brand name and reputation in the marketplace, distribution and staff retention, and new sales and product persistency,” Moodys says in a comment about the deal.
Reproduced from National Underwriter Life & Health/Financial Services Edition, February 27, 2004. Copyright 2004 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.