Review of Bid for Farmers Requested : State Legislators Fear Loss of Jobs, Big Debt at L.A.-Based Insurer

Expressing “deep concern” over the potential loss of California jobs if Los Angeles-based Farmers Group were taken over, 60 state legislators have written Insurance Commissioner Roxani M. Gillespie, urging her to give the matter “the most thorough possible review.”

Gillespie and regulators in eight other states where Farmers’ insurance subsidiaries are headquartered must approve or reject any proposed change in ownership.

The formerly independent Farmers was acquired less than a year ago by London-based BAT Industries. Now BAT is the target of a hostile, $21-billion bid by Hoylake Investments, a consortium headed by Anglo French financier Sir James Goldsmith. If successful, Hoylake would immediately sell Farmers to a French partner, Paris-based Axa Midi Assurance, for $4.5 billion. Axa Midi also owns a 15% stake in Hoylake.

Although the legislative letter was dated Aug. 24, before Axa Midi surfaced as the intended purchaser of Farmers, its author, Sen. Alfred E. Alquist (D-San Jose), made it public only Tuesday. The release followed closely Goldsmith’s crucial victory last Friday, when British regulators gave Hoylake a year to obtain regulatory approvals in the United States. Hoylake had faced the impossible task of completing that by Oct. 7.

No Junk Bonds

If the takeover is approved, Alquist charged in a statement accompanying the letter, “the transaction will immediately burden Farmers with $4.5 billion in debt.” He likened that to the acquisition of Federated Department Stores by Canada’s Campeau Corp., which is struggling to pay off the debt.

“Goldsmith and Axa Midi plan to do the same thing to Farmers--burden it with massive debt,” Alquist claimed.

But Pierre Barberis, Axa Midi’s chief executive, immediately disputed that contention. In a statement issued in Paris, Barberis said Axa Midi would use “absolutely no junk” bonds in acquiring Farmers from Hoylake. “There will be no negative financial impact on Farmers,” he predicted.

“Axa Midi is in very strong financial condition, with virtually no long-term debt,” he added.

Meanwhile, a federal judge in Kansas denied an attempt by Hoylake to block review of the takeover by that state’s insurance commissioner. Federal courts have rebuffed Hoylake in five of the nine states where insurance reviews are to be conducted. Barberis said Axa Midi is cooperating with state regulators, including Commissioner Gillespie.