CGU and NU merger now confirmed (June 2000)
The Scheme of Arrangement effecting the merger of CGU and Norwich Union became effective on Tuesday 30th May 2000. In accordance with the terms of the merger, and with effect from this date CGU has changed its name to CGNU plc.
CGU & NU merger likely to go ahead (April 2000)
Analysts have broadly welcomed the merger of CGU and Norwich Union but
are playing down the likelihood of a counter-bid from a rival European
insurer. However, Pehr Gyllenhammar, the chairman of CGU, said more mergers
are likely. "You should see this merger as creating a strong UK business
and as a stepping stone to further consolidation of the UK and international
The stock market reacted indifferently to the merger, as shares in NU
fell by 9% and those in CGU by 3% soon after the deal was announced. If
approved by both sets of shareholders in May, the union will create the
UK's largest insurer and tenth largest in Europe, with a market value
of around £18 billion.
CGNU, as the group is being called, will have a combined premium income
of £23 billion and operating profits of £3 billion. Bob Scott,
chief executive of CGU, presented the new company as a "merger of
equals" although CGU is the larger partner, with its shareholders
owning 58.5% of the group and NU's 41.5%. He will be the group's chief
executive until he steps down from CGU in June 2001, and NU's Richard
Harvey takes over.
Annual cost savings from the merger, to be completed by June 2001, are
expected to be £250 million. Some of these savings will come from
more than 4,000 UK job losses, out of the 35,000 employed by the group.
Both groups when merged intend to press forward with the best of their
combined e-commerce ventures, particularly in the areas of interactive
television and online quote services.
Chris Hitchings, analyst at Commerz bank, said the merger, if it works, will create a very strong UK company. He added that UK insurers are currently priced too highly to interest European insurers. "CGU has a very good asset management business outside the UK but less so here, and NU's position is vice versa. Both are likely to benefit and NU achieves its overseas expansion plans at a stroke." Analyst David Hudson at HSBC bank thought it unlikely that a continental insurer would attempt to wreck the planned merger with a counter-bid. He said: "Because it's an agreed bid between CGU and NU it would take a very aggressive action to break it up."