CHICAGO -- Kemper Corp.'s dance card is open again now that suitor Conseco Inc. has abandoned its proposed merger with the firm.
But some analysts yesterday questioned whether Kemper is still an attractive partner considering its very public turmoil in recent months -- and years.
Kemper's $3.25 billion offer from Carmel, Ind.-based Conseco collapsed over the weekend, about two weeks after Conseco reduced its $67-per-share bid to $60 per share. Conseco was planning to sell its stake in three insurance companies and take on significant debt to finance the deal. Rising interest rates and falling insurance. stock prices intersected to make the deal untenable for Conseco.
"It became clear to both parties that the proposed merger, even under Conseco's revised terms, could not be completed," said David B. Mathis, chairman and chief executive officer of Kemper.
General Electric Capital Corp. sparked a prolonged bidding war for Kemper last January with a $2.2 billion offer to buy the company. But even before that, Kemper was struggling internally. In 1991, it completed a reorganization of its securities unit that involved nearly 1,200 layoffs and the centralization in Chicago of its five regional brokerage operations.
Though the realignment was ostensibly finished, rumors swirled in 1993 that the company was selling off its securities unit. Company officials acknowledged they had received bids, but then announced the unit was not for sale. And several top securities executives decamped later that year, prompting an overhaul in the division.
"Kemper has been in a restructuring for the past two or three years," said Adam Klauber, assistant vice president at Duff & Phelps Credit Rating Co. "They've sold off some pieces of the puzzle that didn't make sense, and they've come a long way, but they have to get a little performance out of the units they have now.
Buffeted by years of uncertainty, some Kemper employees said they were sorry to see the Conseco deal fail. "I think there's just a lot of disappointment," said one Kemper Securities executive. "We just want all of this behind us and to get on with our lives."
The executive said that the previous attempt by GE to take over Kemper resulted in "headhunters ringing off the hook," adding that he doesn't know of any mass defections recently.
Throughout the ordeal, Kemper's stock has fallen steadily -- from a high of $62 in September to $48.625 last Friday, before the Conseco deal was called off. But Klauber said the low stock price is due in part to the poor market for money managers in a high interest rate environment.
He added that the "recent problems and protracted turnaround" make Kemper less attractive on Wall Street, but probably won't scare off potential bidders.
In fact, Dean Wittier Discover & Co., Chubb Corp., and SunAmerica are said to be waiting in the wings. A source close to Chubb, though, said the company had been considering a bid this summer but has withdrawn permanently. A spokesman for Dean Witter Discover declined to comment. SunAmerica officials did not return calls to comment.
Klauber said of the three companies said to be evaluating a Kemper buy, SunAmerica is the most likely bidder, in part because its cash situation is similar to General Electric's.
"They've been built through acquisitions ... and they have some cash sitting around. They would have to take on some debt to do the deal, but they have a higher rating than Conseco, so it would be easier for them," Klauber said.
Conseco's credit outlook -- and Kemper's -- benefited yesterday after the collapse of the deal became public. Standard & Poor's Corp. affirmed ratings for several types of Conseco debt and took the company off CreditWatch with negative implications. Standard & Poor's revised its CreditWatch comment on Kemper from negative to developing. Moody's Investors Service had not taken any rating action on either company at press time.
