Insurance Australia Group (IAG) shares leaped almost 10 per cent on Wednesday after its proposed $1.4 billion bid for UK motor insurer Equity Insurance Group (EIG) met with universal approval from the market.
The shares were trading at $6.10 by late afternoon on Wednesday, up 8.2 per cent from Monday's pre trading halt price of $5.64.
IAG's equity raising, which will part fund the purchase, was a complete blow out and raised $750 million, $150 million more than the originally intended $600 million.
The price was set at the top of the $5.10 - $5.50 range and represented a 2.5 per cent discount to the closing price of IAG ordinary shares on December 1.
IAG Chief Executive Officer, Mr Michael Hawker said he was pleased with the response to the capital raising.
"It is a reflection of market support for the underlying quality of Equity's business, its fit with our strategy and the strength of our domestic franchise," he said.
Hawker told investors last Monday the Group intended to raise $825 million via a combination of the share placement, a share purchase plan and, if required, underwriting the 2007 interim dividend. The remainder of the purchase will be funded through internal resources.
EIG is the second purchase in three months for IAG after it bought UK insurance broker Hastings in September.
