Conseco calls off Kemper takeover

November 21, 1994|By New York Times News Service

Unable to finance its proposed takeover of Kemper Corp. and having seen its stock price plunge 27 percent since it made the offer, Conseco Inc. yesterday called off the $3.25 billion deal.

The move came after Citibank, the lead lender, indicated that it probably would not be able to finance even a lowered bid, one person close to the negotiations said.

Rising interest rates had made the loans needed to complete the deal more expensive while depressing the value of Kemper's brokerage and mutual fund businesses.

Kemper made the deal with Conseco, an insurance company based in Carmel, Ind., while it was fighting a hostile offer from General Electric Co.

Yesterday's news now leaves it free to entertain offers from GE or anyone else. Since Conseco said on Nov. 2 that it wanted to lower its offer from $67 a share in cash and stock to $60, Kemper has received private expressions of interest from GE, Chubb Corp. and SunAmerica, one person at Kemper said.

It is not clear how much another party would be willing to pay, or whether any deal will occur. GE had originally offered $55 a share, and indicated a willingness to go to $60 before the Conseco bid appeared.

The dropping of the deal was announced in statements by the two companies, but neither company's executives were willing to speak to reporters.

The statements quoted Stephen Hilbert, Conseco's chief executive, and David Mathis, Kemper's chief executive, as saying it had become clear to both parties that the transaction could not be completed.

Mr. Mathis said the board of Kemper, a financial services and insurance company in Long Grove, Ill., "remains committed to the goal of maximizing value for our shareholders and we plan to explore all possible alternatives as expeditiously as practicable."

Conseco's efforts to finance the deal were public and embarrassing. It said it might sell its stakes in one or more insurers it controls. That sent the prices of those companies up, only to fall after it became clear that no buyers were available at the prices Conseco sought.

Banks led by Citibank were to put up $1.22 billion in loans. But the bank told Conseco that, given the declining results at Kemper, it needed to get new commitments from the other banks and refused to guarantee success.

Another $750 million was to be raised by selling bonds through Morgan Stanley & Co. The brokerage firm had issued a letter saying it was highly confident it could sell the bonds. Morgan Stanley never withdrew the letter, but an inability to arrange other financing rendered the commitment moot.

Under terms of the cancellation, Conseco will get no money from Kemper even if it arranges another deal, both sides said.

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