LONG GROVE, Ill. - Kemper Corp. is still a viable and attractive acquisition target despite the meltdown of its merger with Conseco Inc.
Industry analysts say Kemper's chairman and chief executive officer, David B. Mathis, is likely to ask his board for patience as management evaluates new bidders for Kemper's more than $60 billion money management business and life insurance and brokerage operations.
"Other companies are going to look at Kemper just as Conseco did," said Eli Neusner, a consultant with money management consulting firm, Cerulli & Associates, Boston. "It's a chance to buy up one of the largest insurance company money management portfolios, to tap into retail mutual fund management, and to do so via one of the very largest brokerage and distribution channels out there. Kemper is unrivaled for its distribution network for insurance and investment management products. It remains an extremely attractive target."
Additional suitors already have surfaced, and they reportedly include General Electric Capital Corp., Stamford, Conn., whose initial offer set off the bidding for Kemper in March 1994.
Dean Witter, Discover & Co., New York, and SunAmerica Inc., Los Angeles, also have reportedly shown interest. None of the companies would comment on their interest in Kemper at press time.
Chubb Corp., Warren, N.J., had also looked at Kemper as an acquisition last summer, but "is not a player now. We haven't re-examined Kemper and it is highly unlikely we would get involved at this point," said Glen Montgomery, a Chubb spokesman.
Kemper's Mr. Mathis said in a Nov. 20 press statement announcing the demise of the Conseco deal: "Our board remains committed to the goal of maximizing value for our stockholders and we plan to explore all possible alternatives as expeditiously as practicable."
Kemper spokesmen would not comment further on Mr. Mathis' statement, but analysts maintain Kemper is looking for a buyer.
Kemper's potential purchase price is controversial. Conseco's bidding for Kemper began at $67 per share in order to beat GE's initial offer of $55. Ironically, Conseco's final price came down to $60 per share paid in cash and shares by the time the deal was called off, the same price as GE's final cash offer last spring.
Some analysts suggest Kemper will command a lower purchase price per share now - in an environment of rising interest rates - than it did when bidding began.
One industry analyst pointed out, "It's been a wild year with far more volatility than the markets have seen for a while. I think people are looking at Kemper with an extremely short-term view when they talk about the company's diminished value as a money manager, based on one year's performance. And does anyone really expect that interest rates will go much higher? In the long-term, $60 billion under management is still $60 billion under management and Kemper is as unlikely to lose its client base because of one year's results as any other manager would be."
Kemper is for sale in a seller's market, said Mr. Neusner, even in a climate of rising interest rates. "The money management market is consolidating and will continue to do so. Kemper is a big prize in this business; a plum of that size will become increasingly rare. For a well-heeled, well-financed buyer, I think a price for Kemper of $59 or $60 a share is not at all unlikely. I'd be surprised if the price dropped below $60 per share," he said.
Kemper is motivated to sell, said Mr. Neusner, and will have the luxury of choosing from bidders much more carefully this time. "Time is of the essence for the purchasers in this deal. What Kemper will decide and where it will go as a money management firm will be defined by the size of the bids it receives. Bidders will need to get in there early."
Kemper and Conseco, Carmel, Ind., agreed to end their deal without obligation on either side, a positive factor for Kemper. The original agreement barred Kemper from dissolving the deal and merging with another company unless Kemper paid Conseco a $100 million penalty and out-of-pocket expenses.
The market was skeptical all along about Conseco's ability to pay the bill. The company proposed to raise most of the cash for the sale through debt financing. The amount of debt service load required would be too much for the means of the company, noted Mr. Neusner.
Additionally, many investors and analysts have noted Conseco is not as strong a partner as GE would have been (Pensions & Investments, July 25).
GE is generally considered a good strategic match for Kemper, with GE's large institutional management business well complemented by Kemper's stronger retail and 401(k) plan presence. But relations still might be awkward between GE and Kemper, following Kemper's rejection of GE's overtures in March.
The failed Conseco deal also may have taken its toll on morale at Kemper, suggested Brad Hearsh, managing director of PaineWebber Inc., New York.
