BNP Perhaps Buying Ageas Stake: Could Lead To Ageas' Credit Rallying

BNP is reportedly looking to buy Fosun’s 7.2% stake in Ageas (AGS BB). Full takeover speculation could well lead to a rally in Fosun’s cash bonds, we feel.

• Ageas launched a mostly-paper takeover bid for the UK’s Direct Line (DLG LN) on 28-Feb which was rejected. It increased the value of the offer and cash proportion (from 43% to 50%) on 13-Mar and Sky was reporting yesterday (14-Mar) that a “top 10 investor” in Ageas was against the bid.
• At the time, we noted that both the equity market pricing implies this bid may fail but also that Ageas’ implicit acknowledgement of lack of growth could put it into play.
• BBG is now reporting BNP is looking to buy this stake. A full acquisition of Ageas would be complementary, allowing BNP to bulk up in Belgium (a market where it is already sizeable) and add further insurance earnings. Ageas’ market valueis around EUR7.4bn, 11% of BNP’s size so digestible and reports indicate Fosun is keen to offload assets to improve its own funding situation.
• Ageas’ ’49 index constituent (AGSBB 3.25 07/02/2049) has marginally underperformed insurance bonds since the bid was announced and a BNP takeover could well see Ageas’ credit tighten meaningfully.