By Toby Sterling
AMSTERDAM (Reuters) - The largest Dutch insurer NN Group (AS:NN) on Friday raised its proposed bid for peer Delta Lloyd (AS:DLL) slightly, winning support from the latter's boards for a takeover valuing the company at around 2.5 billion euros (2.13 billion pounds).
Delta Lloyd, which had rejected an initial unsolicited 5.30 euro per share offer as insufficient, has accepted the current offer that values it at 5.40 per share.
The agreement comes after a turbulent two years at Delta Lloyd which saw its top executives leave and the company twice issue new shares.
Delta Lloyd CEO Hans van der Noordaa acknowledged in a statement that Delta Lloyd's capital position played a role in accepting NN Group's offer.
NN Group, which said the deal will strengthen its position on the Dutch market, said the offer represented a 55 percent premium to Delta Lloyd's average share price prior to NN's initial bid on Oct. 5. Delta Lloyd shares closed Thursday at 5.328 euros.
NN Group said it will pay in a mix of cash and debt and expects a 10 percent return on investment on the deal, which would reduce its solvency to 185 percent on a pro-forma basis in the third quarter. As of the second quarter, NN Group's solvency was 252 percent.
"Our balance sheet will remain strong," NN Group CEO Lard Friese told reporters on a conference call. He said the combination would strengthen NN Group's position on the Dutch market, and lead to 150 million euros in synergies by 2020.
In rejecting the earlier offer, Van der Noordaa had estimated synergies at 200 million euros.
Asked whether Delta Lloyd shareholders would support the deal at 5.40 euros per share after Van der Noordaa had said the 5.30 offer "significantly" undervalued Delta Lloyd, he said he was confident they would.
"It's not only about price," Van der Noordaa said, but the need for Delta Lloyd to retain a competitive position on the Dutch market, which regulators have said is in need of consolidation.
Van der Noordaa said he would step down as CEO of Delta Lloyd after completion of the deal.
($1 = 0.9571 euros)