It was not just the size of this deal – one of the biggest rights issues ever – that was remarkable. The deal was also launched into an exceptionally challenging environment, characterised by weak equity markets and, in light of the looming war in Iraq, an extremely negative investor sentiment toward Germany and the insurance sector.
Nevertheless, the joint global co-ordinators dramatically turned around sentiment by successfully marketing the deal with international blue-chip investors. This was achieved with a strong restructuring story for Allianz to address criticism of the company’s fundamentals.
In addition, the offering was timed around the company’s dividend payment, significantly reducing share availability for borrowing and requiring short positions to be cleared, thus generating technical demand for the share during the subscription period.
The objective behind the rights issue was to strengthen Allianz’s capital base and to provide a safety margin for further strategic steps to maintain its AA-rating.
When the dust had settled, Allianz’s stock was up 8% from the pre-announcement close. As a leading European insurance company and one of the key members of the Frankfurt DAX, the strong share price performance throughout the offer period signalled renewed confidence in the insurance sector and German equities.
