Rec. Offer by Nat.West - Pt.1
LEGAL & GENERAL PLC
6 September 1999
PART 1
Not for release, publication or distribution in or into
the United States, Canada, Australia or Japan.
SUMMARY
NATIONAL WESTMINSTER BANK PLC RECOMMENDED OFFER FOR
LEGAL & GENERAL GROUP PLC
The boards of National Westminster Bank Plc ('NatWest')
and Legal & General Group Plc ('Legal & General') jointly
announce that they have reached agreement on the terms of
a recommended share and cash offer ('the Offer') by
NatWest for Legal & General. The boards believe that
this combination will provide significant benefits to the
shareholders, customers and staff of both NatWest and
Legal & General.
Key Points
- share and cash Offer of 210p per share, valuing
Legal & General at £10.75 billion (see Offer Structure
detail below)
- creation of a powerful new force in the UK financial
services market
- potential for substantial revenue enhancement and
cost savings
- strategy led by customer focused, value for money
products, provided under both NatWest and Legal & General
brands
- board and management structure ensures clear
responsibilities for delivering the strategy
- enhanced quality of earnings
- enhanced headline earnings per share expected when
the full scale of synergies is realised
- Offer financed by issue of £6.40 billion of New
NatWest Shares, £2.25 billion of subordinated debt and
£2.10 billion of cash from internal resources
Offer Structure
The Offer for each Legal & General Share comprises 85p in
cash plus between 0.103 and 0.10936 of a New NatWest
Share, valuing each Legal & General Share at 210p on the
basis of a NatWest share price of 1143p, being the
closing middle market price on 3 September 1999, and
final terms of 0.10936 of a New NatWest Share for each
Legal & General Share.
The Offer represents a premium of 20% over Legal &
General's closing middle market price of 174.75p on 1
September 1999, the day before market speculation of the
Offer.
The Offer includes a Mix and Match Election and a Loan
Note Alternative. After completion and assuming full
acceptance, NatWest Shareholders will hold approximately
75%, and Legal & General Shareholders will hold
approximately 25%, of the enlarged issued ordinary share
capital of NatWest.
The Offer of £10.75 billion is a multiple of 2.2x
embedded value as of 30 June 1999 and 18.6x Legal &
General's achieved profits after tax for the twelve
months to 30 June 1999. The goodwill element represents
a multiple of 49x annualised new business value for the
six months to 30 June 1999.
Commenting on the transaction:
Sir David Rowland, Chairman of NatWest, said: 'This is a
vital strategic move by NatWest. Legal & General is a
group with strong management, a great record and
excellent prospects. There is real commitment from the
leadership of both companies to deliver the full
potential of the new group.'
Sir Christopher Harding, Chairman of Legal & General,
said: 'This transaction will expand on Legal & General's
proven model of value for money products, backed by
quality advice through a choice of distribution channels.
The combined group will be exceptionally well attuned to
the needs of customers in the rapidly changing financial
services market. It will benefit customers through
better value, employees through better prospects and our
shareholders through the participation they gain in the
combined group.'
Transaction Benefits
The combined group will be a powerful new force in the
fast developing UK financial services market, securing
significant competitive advantage through the
opportunities to accelerate revenue growth, gain combined
cost savings and add value to both the NatWest and Legal
& General brands.
The board of NatWest believes the transaction will both
improve the quality of earnings and result in enhanced
headline earnings per share as the full scale of
additional income and cost synergies are progressively
realised.
The board of Legal & General believes its shareholders
will benefit both from the transaction price and the
opportunities the combined group will have to create
value.
Both boards believe that customers will benefit from the
strategy of improved value for money products and
services and that employees will benefit from the
stronger competitive position and prospects of the
combined group.
- Market Position
The combined group will have an exceptional range of
financial services and brands across the full range of
distribution channels, capable of meeting the needs of
individuals throughout their lifetimes and targeting
the personal, high net worth and corporate markets.
The combined group will have a leading position in
distribution through IFAs, affinity groups, tied
agents, direct sales and bank branches and will be able
to accelerate development of its e-commerce platform
and services.
- Revenue Growth
Legal & General has an advanced, high quality and
efficient product development and administrative
platform. The substantial additional volume of
NatWest's sales of medium and long-term savings and
investment products will leverage off this, providing
the potential for significant further reductions in
unit operating costs for the combined group.
The transaction will enable the development of better
value medium and long-term savings and investment
products for NatWest customers, who will benefit from
the transfer of Legal & General's marketing, sales and
advisory skills. It will also enable the provision of
NatWest banking services to Legal & General customers.
The combined group will also benefit from the
combination of NatWest's share of the corporate banking
market, especially for smaller and medium sized
companies, and Legal & General's recognised range of
pensions products.
- Cost Savings
Annualised cost savings of at least £130 million pre-
tax to be achieved by the end of 2002. This is in
addition to the cost savings being secured by NatWest's
existing strategy.
The cost savings will be achieved by integrating
overlapping businesses and operations, including:
- benefits through sharing IT developments and
operational expenditure;
- rationalisation of the fund management businesses;
- savings from the unification of the combined group's
life and pensions businesses;
- integration of NatWest's and Legal & General's
general insurance businesses;
- amalgamation of the banking operation of Legal &
General into NatWest; and
- elimination of duplicated Head Office functions.
Restructuring costs, estimated to be £130 million, are
expected to be incurred in integrating the two
businesses.
- World Scale Asset Management
The combined group will have some £150 billion of
assets under management and leading brands in both
active management through Gartmore and indexed fund
management through Legal & General.
Board Structure
Under the Chairmanship of Sir David Rowland, the
Executive Directors of NatWest will have the following
responsibilities:
- Derek Wanless will be Deputy Chairman and Group
Chief Executive with direct business responsibilities for
Card Services, Corporate Banking, Greenwich NatWest and
Global Financial Markets.
- David Prosser will be Deputy Chairman with
responsibility for retail banking and financial services
and the wealth management businesses, including
investment management, private banking and the life and
pensions business, reporting to Derek Wanless.
- Richard Delbridge will be Group Chief Financial
Officer, reporting to Derek Wanless.
- Bernard Horn will be Executive Director, Group
Operations, reporting to Derek Wanless.
- David Rough will be Executive Director, Investment
Management, reporting to David Prosser.
Paul Myners, Executive Director, Wealth Management
Businesses of the NatWest Group, accepts that he will not
have a role once this transaction is completed. He has
nevertheless agreed to stay on to support the
transitional arrangements until the beginning of next
year. In addition, NatWest was already considering a
reorganisation that would have involved the retirement of
Martin Gray, Executive Director, Retail & Commercial
Businesses. Martin Gray will retire as already planned
after 36 years with NatWest at the end of October.
Following the transaction, Sir Christopher Harding,
Chairman of Legal & General, Rob Margetts, Vice Chairman
of Legal & General, and Lord Burns, a non-executive
director of Legal & General, will become non-executive
directors of NatWest.
NatWest is advised in this transaction by J.P. Morgan and
Legal & General is advised by Schroders.
This summary should be read in the context of the full
text of this announcement.
There will be a presentation to analysts at 9.30 a.m.
today at the Gibson Hall, 13 Bishopsgate, London, EC3.
There will be a press conference at the same venue at
11.30 a.m. today.
ENQUIRIES:
NatWest
NatWest Media Terrence 0171 726 1077
Collis
Investor Geoffrey 0171 726 1103
relations Pelham-Lane
J.P. Morgan Financial adviser Terry Eccles 0171 325 4169
to NatWest
Cazenove & Broker to NatWest David Mayhew 0171 588 2828
Co.
Legal &
General
Legal & Media Graham Rimmer 0171 528 6252
General
Investor Peter Horsman 0171 528 6362
relations
Schroders Financial adviser Will Samuel 0171 658 6000
to Legal &
General
Citigate, Communications Anthony 0171 638 9571
Dewe Rogerson adviser to Legal Carlisle
& General
Dresdner Broker to Legal & Mark Smith 0171 623 8000
Kleinwort General
Benson
Warburg Broker to Legal & Hew Glyn 0171 567 8000
Dillon Read General Davies
NATIONAL WESTMINSTER BANK PLC RECOMMENDED OFFER FOR
LEGAL & GENERAL GROUP PLC
1. Introduction
The boards of National Westminster Bank Plc ('NatWest')
and Legal & General Group Plc ('Legal & General')
announce that they have reached agreement on the terms of
a combination of NatWest and Legal & General by way of a
recommended share and cash offer to be made by J.P.Morgan
on behalf of NatWest to acquire the whole of the issued
and to be issued ordinary share capital of Legal &
General.
2. The Offer
The Offer, which will be subject to the conditions set
out in Appendix I and in the Offer document, will be made
by J.P.Morgan on behalf of NatWest on the following
basis:
85p in cash
plus
between 0.103 and 0.10936 of a New NatWest Share
for each Legal & General Share.
The Offer will include a Mix and Match Election and a
Loan Note Alternative, as detailed below.
The Offer1:
- values each Legal & General Share at 210p and values
Legal & General's issued share capital at £10.75 billion;
- represents a premium of 20% over 174.75p, being the
closing middle market price of a Legal & General Share on
1 September 1999 (the last dealing day prior to market
speculation of the Offer);
- represents a multiple of 2.2 times Legal & General's
embedded value as at 30 June 1999, with the goodwill
element representing a multiple of 49 times Legal &
General's annualised new business value for the six
months to 30 June 1999; and
- represents a multiple of 18.6 times Legal &
General's achieved profits after tax for the twelve
months to 30 June 1999.
At 30 June 1999 the shareholders' funds of Legal &
General were £4.84 billion on an achieved profits basis.
The Offer will give rise to goodwill of £5.91 billion
(excluding transaction costs).
The New NatWest Shares issued pursuant to the Offer will
be issued credited as fully paid and will rank pari passu
with the existing NatWest Shares (including in respect of
the right to receive the final dividend in respect of the
year ending 31 December 1999, which is expected to be
paid in May 2000). Legal & General Shareholders will
retain the right to the 1999 interim dividend of 1.30
pence (net) per Legal & General Share which will be paid
on 1 October 1999 to Legal & General Shareholders on the
register at the close of business on 10 September 1999.
3. Calculation of share consideration
The number of New NatWest Shares offered for each Legal &
General Share will be calculated using a reference price
(the 'Reference Price') equal to the arithmetic average
value of the closing middle market quotations for a
NatWest Share, derived from the Stock Exchange Daily
Official List, over the 15 consecutive dealing days
ending on the day two days prior to the day on which the
Offer becomes or is declared unconditional as to
acceptances.
If the Reference Price is 1211p1 or higher, the number of
New NatWest Shares offered for each Legal & General Share
will be 0.103. If the Reference Price is 1143p2 or less,
the number of New NatWest Shares offered for each Legal &
General Share will be 0.10936. If the Reference Price is
between these levels, the share consideration will be
between 0.103 and 0.10936 of a New NatWest Share for each
Legal & General Share, calculated to five decimal places
on a pro rata basis.
The effect of these arrangements is that the value of the
Offer based on the Reference Price is fixed at 210p per
Legal & General Share provided the Reference Price falls
in the range between 1143p and 1211p.
4. Reasons for the Offer
The combined group will be a powerful new force in the
fast developing UK financial services market, securing
significant competitive advantage through the
opportunities to accelerate revenue growth, gain combined
cost savings and add value to both the NatWest and Legal
& General brands.
The board of NatWest believes the transaction will both
improve the quality of earnings and result in enhanced
headline earnings per share as the full scale of
additional income and cost synergies are progressively
realised.
The board of Legal & General believes its shareholders
will benefit both from the transaction price and the
opportunities the combined group will have to create
value.
- Market Position
The combined group will have an exceptional range of
financial services and brands across the full range of
distribution channels, capable of meeting the needs of
individuals throughout their lifetimes and targeting the
personal, high net worth and corporate markets. The
Legal & General brand will be used in life insurance and
investments for non-bank customers including sales
through Independent Financial Advisers ('IFAs'), tied
agents and company representatives. NatWest branded
products, manufactured by Legal & General, will be
distributed through the NatWest branch network. NatWest
will maintain its multi-brand strategy with respect to
Greenwich NatWest, Coutts, Lombard and Ulster Bank Group.
Legal & General's investment management operations and
Gartmore will continue to maintain separate brands and
their respective strengths in indexed and active fund
management. The combination of the two will
significantly strengthen the Enlarged Group's asset
management businesses which had in excess of £150 billion
funds under management as at 30 June 1999.
The combined group will have a leading position in
distribution through IFAs, affinity groups, tied agents,
direct sales and bank branches and will be able to
accelerate development of its e-commerce platform and
services.
The combined group will be better positioned to play a
substantial role in the consolidating European financial
services marketplace and to achieve significant growth in
the Continental European long term savings industry.
- Revenue Growth
Legal & General has an advanced, high quality and
efficient product development and administrative
platform. The substantial additional volume of NatWest's
sales of medium and long-term savings and investment
products will leverage off this, providing the potential
for significant further reductions in unit operating
costs for the combined group.
The transaction will enable the development of better
value medium and long-term savings and investment
products for NatWest customers, who will benefit from the
transfer of Legal & General's marketing, sales and
advisory skills. It will also enable the provision of
NatWest banking services to Legal & General customers.
The combined group will also benefit from the combination
of NatWest's share of the corporate banking market,
especially for smaller and medium sized companies, and
Legal & General's recognised range of pensions products.
- Cost Savings
Annualised cost savings of at least £130 million pre-tax
to be achieved by the end of 2002. This is in addition
to the cost savings being secured by NatWest's existing
strategy.
The cost savings will be achieved by integrating
overlapping businesses and operations, including:
- benefits through sharing IT developments and
operational expenditure;
- rationalisation of the fund management businesses;
- savings from the unification of the combined group's
life and pensions businesses;
- integration of NatWest's and Legal & General's
general insurance businesses;
- amalgamation of the banking operation of Legal &
General into NatWest; and
- elimination of duplicated Head Office functions.
These savings will be in addition to NatWest's previously
stated commitments, which are that NatWest is determined
that:
- costs (excluding the effect of disposals, revenue
investment and restructuring) in 1999 will be lower than
in 1998 1; and
- NatWest UK costs (excluding revenue investment and
restructuring) in 2000 will be lower than in 1997 2.
Restructuring costs, estimated to be £130 million, are
expected to be incurred in integrating the two
businesses.
5.Benefits for customers and employees
Both boards believe that customers will benefit from the
strategy of improved value for money products and
services and that employees will benefit from the
stronger competitive position and prospects of the
combined group.
The combined group will have the products, the network
and the operational efficiency to enable it to provide
improvements in product range, pricing and customer
service. In particular, customers of both organisations
will benefit from:
- an enlarged group of businesses with a broader range
of products, which can better meet diversified customer
needs; and
- the combining of the best of both institutions'
skills and resources, thereby enhancing the quality of
value-added products and services.
The boards believe that prospects for most of the
existing employees will be improved because of the
enhanced position and outlook of the combined group and
the broader scope of career opportunities.
The existing employment rights, including pension rights,
of the management and employees of Legal & General and
its subsidiaries will be fully safeguarded. Some staff
will be affected by the amalgamation of functions and,
where possible, the combined group will take steps to
find alternative positions for these employees and will
endeavour to achieve any redundancies on a voluntary
basis or through normal turnover and, in any event, after
appropriate consultation.
6.Board and Senior Management
Under the Chairmanship of Sir David Rowland, the
Executive Directors of NatWest will have the following
responsibilities:
- Derek Wanless will be Deputy Chairman and Group
Chief Executive with direct business responsibilities for
Card Services, Corporate Banking, Greenwich NatWest and
Global Financial Markets.
- David Prosser will be Deputy Chairman with
responsibility for retail banking and financial services
and the wealth management businesses, including
investment management, private banking and the life and
pensions business, reporting to Derek Wanless.
- Richard Delbridge will be Group Chief Financial
Officer, reporting to Derek Wanless.
Bernard Horn will be Executive Director, Group
Operations, reporting to Derek Wanless.
- David Rough will be Executive Director, Investment
Management, reporting to David Prosser.
Paul Myners, Executive Director, Wealth Management
Businesses of the NatWest Group, accepts that he will not
have a role once this transaction is completed. He has
nevertheless agreed to stay on to support the
transitional arrangements until the beginning of next
year. In addition, NatWest was already considering a
reorganisation that would have involved the retirement of
Martin Gray, Executive Director, Retail & Commercial
Businesses. Martin Gray will retire as already planned
after 36 years with NatWest at the end of October.
Following the transaction, Sir Christopher Harding,
Chairman of Legal & General, Rob Margetts, Vice Chairman
of Legal & General, and Lord Burns, a non-executive
director of Legal & General, will become non-executive
directors of NatWest.
The integration of Legal & General will be linked with
other planned management changes to reinforce further a
strong focus around customer groups at NatWest and
strategic development. These will be announced shortly
by NatWest.
7. Information on NatWest
NatWest is one of the largest UK banking and financial
services groups, providing a wide range of banking,
financial and related services principally in the UK.
The NatWest Group comprises six main business segments:
NatWest UK, Ulster Bank Group, NatWest Wealth Management,
Global Financial Markets, Greenwich NatWest and Other
Businesses.
NatWest UK
NatWest UK is the Group's principal domestic financial
services arm and is organised into five business units:
Retail Banking Services covering the personal and small
business markets; Mortgage Services offering mortgages to
personal customers; Insurance Services providing
insurance broking services and independent financial
advice on life and pensions products; Card Services
issuing credit, charge and debit cards to personal and
corporate customers; and Corporate Banking Services
dealing with mid-sized and large corporate customers.
As a leading retail bank, NatWest has over 6 million
personal customers, approximately 16% of the UK market,
and has 5 million personal credit and chargecards in use
in the UK. In addition, NatWest UK has the largest
number of business customer relationships in the UK (28%
of mid-corporates and 26% of small businesses). NatWest
Streamline is the UK's largest bankcard processor
handling over 1 billion transactions per annum.
Ulster Bank Group
Ulster Bank Group provides a comprehensive range of
retail and wholesale financial services in both Northern
Ireland and the Republic of Ireland. Ulster Bank Retail
operates in the personal and commercial sectors,
undertaking lending, deposit taking, credit and debit
cards and insurance operations. Ulster Bank Markets
provides a wide range of investment banking products and
services.
NatWest Wealth Management ('NWWM')
NWWM brings together the Group's businesses that focus on
the longer-term savings, investments and private banking
markets. The segment includes Coutts NatWest, the UK and
international private banking arm, which offers an
extensive range of investment, fiduciary and banking
services, including portfolio management and
stockbroking. Gartmore is one of the UK's leading
companies in the management of equity and fixed income
assets, providing a full range of services for retail,
corporate and institutional clients. NatWest Life and
Investment Services provides life and investment products
to NatWest UK's customer base, while NatWest Equity
Partners is one of the UK's leading providers of private
equity finance.
Global Financial Markets ('GFM')
GFM provides foreign exchange, money market, currency
derivative and rate risk management services to corporate
and institutional clients with its activities largely
centred in London, New York, Tokyo, Hong Kong and
Singapore. It also engages in similar activities for its
own account and provides treasury services support to the
Group itself and its constituent businesses.
Greenwich NatWest
Formed in March 1998, its ongoing debt markets business
comprises origination, distribution and trading
activities based in London, Greenwich (Connecticut) and
Tokyo. Its main activities are: global interest rate
derivatives trading; securitisation origination and
trading; credit sales and trading; sovereign debt
trading; futures brokerage and project and structured
trade finance origination.
Other Businesses
Other Businesses comprise Hawkpoint Partners and
commercial banking operations in Germany, together with
assets retained following the disposal or termination of
operations in Australia, Spain and the US.
Summary financial information on NatWest for the three
years to 31 December 1998 and for the six months to 30
June 1998 and 1999 is set out in the table below. This
information has been extracted from NatWest's 1998 annual
report and accounts and the unaudited interim
announcement of results for the six months to 30 June
1999.
Year to 31 December 6 months to 30
June
£ millions 1996 1997 1998 1998 1999
Continuing
operations
Operating income 6,885 6,974 7,367 3,677 3,628
Operating expenses (4,724) (5,274) (5,055) (2,523) (2,361)
Provisions for bad (549) (562) (499) (207) (126)
and doubtful debts
Other items 80 (242) 245 20 (1)
including
profits/(losses)
on
disposal/terminati
on of businesses
Profit before tax 1,692 896 2,058 967 1,140
from continuing
operations
Discontinued (355) 79 84 - -
operations
Profit before tax 1,337 975 2,142 967 1,140
Profit 617 591 1,566 690 776
attributable to
ordinary
shareholders
Total assets 185,510 185,494 185,993 190,480 185,262
Tier 1 capital 6.7% 7.2% 8.3% 7.7% 8.6%
ratio
Total capital 10.8% 11.7% 13.2% 11.9% 13.8%
ratio
8. Information on Legal & General
The Legal & General Group is a leading multi-channel life
insurance and investment management business in the UK
operating under a single strong brand. Its activities
are focused on life assurance, pensions, savings and
protection policies for individuals. It also provides
corporate services such as investment management, group
life, corporate annuity, company pensions schemes and
permanent health insurance. The UK is the core market
but the Group has a rapidly growing term assurance
business in the USA, together with small life and asset
management businesses in France and the Netherlands.
The Group's UK life and pensions operations make up the
majority of its business, contributing 61% of its 1998
operating profit before tax, on an achieved profits
basis. Distribution is primarily through IFAs, self
employed financial consultants, and appointed
representatives, constituting 52%, 15% and 15% of 1998
Equivalent Premium Income ('EPI')1 respectively. The
Group also operates a leading telesales channel. Total
funds under management were £94 billion as at 30 June
1999. Over half of funds managed in the UK of £91
billion are managed for external clients. The Group's
general insurance business is restricted to personal
lines, primarily household business. It also has a small
banking operation offering deposit accounts and
mortgages, and an estate agency.
As an efficient provider, the Legal & General Group views
itself as well placed to benefit from the proposed
introduction of stakeholder pensions in 2001. The Group
has already invested heavily in core systems and has an
award winning e-commerce capability. It has a high level
of expertise and experience in developing mutually
advantageous relationships with employers, unions and
other affinity groups, and has a wealth of experience in
pension scheme administration and efficient benefit
payment systems.
Summary financial information on Legal & General for the
three years to 31 December 1998 and for the six months to
30 June 1998 and 1999 is set out in the table below.
This information has been extracted from Legal &
General's audited accounts for 1997 and 1998 and the
unaudited interim statements for the six months to 30
June 1998 and 1999.
Achieved profits 1 Year to 31 December 6 months to 30
June
£ millions 1996 1997 1998 1998 1999
Life and pensions
UK n/a 649 327 454 485
International n/a 64 77 30 30
Profit from n/a 713 404 484 515
continuing
operations - life
and pensions
Investment n/a 47 72 35 41
management
Other operations n/a 56 55 27 24
Premium on - - (92) (92) -
repurchase of
Euroconvertible
bonds
Profit from n/a 816 439 454 580
continuing
operations
Other items n/a 66 193 13 -
including profits
on disposal and
discontinued
operations
Profit on ordinary 724 882 632 467 580
activities before
taxation
Tax on profit on (181) (217) (128) (100) (138)
ordinary
activities
Profit 543 665 504 367 442
attributable to
shareholders
Shareholders' 3,589 4,101 4,465 4,430 4,844
funds on an
achieved profits
basis
New business from
continuing
operations
Life and pensions 186 216 245 116 144
- annual premium
1,353 1,267 1,511 748 1,012
- single premium
EPI 321 342 396 191 245
Other UK 4,453 6,629 12,09 5,667 6,600
investment 6
business
£ billions
Total funds under 48 62 83 75 94
management
1996 figures are shown only where they are available on a
basis consistent with those for subsequent years.
Contribution from
long term business
continuing
operations
£ millions
New business n/a 118 135 65 86
In force n/a 228 172 104 87
Shareholders' net n/a 185 176 92 67
worth
Operating profit n/a 531 483 261 240
Variation from n/a 300 (2) 262 319
longer term
investment return
and economic
assumption changes
Profit before tax n/a 831 481 523 559
from long term
business
continuing
operations
1 Achieved profits financial information is prepared on
the basis set out in the draft guidance 'Accounting in
group accounts for proprietary companies' long term
insurance business' issued by the Association of British
Insurers dated February 1996.
2 EPI shown in respect of long term business continuing
operations is calculated as new annual premiums plus one
tenth of single premiums and does not include sales of
unit trusts, PEPs and ISAs.
9. Pro Forma Profit and Loss Account
Set out below is the Pro Forma Profit and Loss Account
for the Enlarged Group. The data have been extracted
from the 1998 audited accounts of NatWest and Legal &
General and their unaudited interim results for the six
months to 30 June 1999. The pro forma adjustments
illustrate the anticipated cost savings arising from, the
financing costs of, and the amortisation of goodwill
relating to, the transaction. Restructuring costs of
£130 million expected to be incurred in integrating the
two businesses have been excluded.
Half Year to Half
year to 31 year to
30 June December 30
June
£ millions 1998 1998 1999
Ongoing business
NatWest 967 1,771 1,135
Legal & General 546 531 580
1,513 2,302 1,715
Exited and other
NatWest
Trading (2) 22 4
profits/(losses) of
businesses
terminated or sold
Profit on 2 265 1
disposal of
businesses
Legal & General
Premium on (92) (92) -
repurchase of
Euroconvertible
bonds
Profit before tax
from continuing
operations
NatWest 967 2,058 1,140
Legal & General 454 439 580
1,421 2,497 1,720
Discontinued
operations
NatWest
Bancorp earnout - 84 -
Legal & General
Trading profits 13 13 -
of discontinued
operations
Profit on - 180 -
disposal of
businesses
Pre-tax profit 1,434 2,774 1,720
Cost savings 1 65 130 65
Transaction (145) (290) (145)
financing costs
Pro forma pre-tax 1,354 2,614 1,640
profit of Enlarged
Group excluding
goodwill arising
from this
transaction
Goodwill (150) (300) (150)
amortisation
Pro forma pre-tax 1,204 2,314 1,490
profit of Enlarged
Group
Return on average 12.2% 11.8% 14.1%
equity2 3
Headline return on 15.6% 11.6% 16.3%
average equity2 3
Headline return on 29.8% 21.7% 28.8%
average tangible
equity2 3
10. Current trading and future prospects
For the six months to 30 June 1999 NatWest announced
increased pre-tax profits of £1,140m (1998: £967m).
NatWest's current trading continues to be satisfactory.
For the six months ended 30 June 1999 Legal & General
reported operating pre-tax profits from ordinary
activities on an achieved profits basis of £580m (1998:
£467 m). Legal & General's current trading continues to
be satisfactory.
11. Financing, capital and accounting
The cash consideration payable under the Offer will be
financed through a combination of the issue of £2.25
billion of subordinated debt and £2.10 billion of cash
from internal resources. NatWest has arrangements in
place to ensure that the subordinated funding is fully
subscribed.
In the light of this transaction NatWest does not intend
to repurchase any shares for the time being.
Based on pro forma figures as at 30 June 1999, NatWest
would have had a Tier 1 capital ratio of 9.0% and a total
capital ratio of 11.5% following the completion of the
transaction.
NatWest intends to incorporate the long-term insurance
business of Legal & General in its financial statements
on an embedded value basis.
MORE TO FOLLOW
OFFUBUGPBBGBUQQ
Latest directors dealings
- 17 hours ago Savannah Energy
- 18 hours ago Buccaneer Energy PLC
- 18 hours ago Savannah Energy
- 18 hours ago Carclo
- 18 hours ago Schroder Japan Growth Fund