Manulife has agreed to acquire the Canadian operations of Standard Life for about C$4 billion ($3.7 billion) in cash, in a deal that significantly expands the insurer's presence in Quebec.
The Toronto-based insurer, already Canada’s largest, said the transaction will boost earnings after the first year and more than double its presence in the largely French-speaking Canadian province, where it has long been under-represented.
The companies said they will also expand an existing wealth and asset management partnership, with Manulife distributing Standard Life funds in Canada, the United States and Asia, and Standard Life doing the same in the UK retail market.
The deal, subject to the approval of regulators and Standard Life shareholders, is expected to close in the first quarter of 2015.
Manulife chief executive Donald Guloien said Standard Life decided several months ago to look at a sale of its Canadian operations, and Manulife was the successful bidder. He predicted it would take one to two years to integrate the assets.
“We think it is a great match with our organization for a whole variety of reasons...They’ve developed some very creative products that are a terrific complement to ours,” he said on a conference call with media.
Manulife said the deal significantly builds its capacity to offer services including group benefits and retirement, several areas of asset management, and liability-driven investing.
Standard Life chief executive David Nish said on a conference call the deal allows the UK company to fully realise the value of the business, which has been turned around in recent years, while expanding their collaboration on distribution.
This could triple the $6 billion of assets under management Standard Life has already gained through a similar product distribution deal with Manulife’s John Hancock unit, Mr Nish said.
He said he expects to return £1.75 billion to Standard Life shareholders via a specific dividend that allows certain investors to report it as either income or capital. He declined to specify a planned use for the remainder of the proceeds.
Excluding transition and integration costs, Manulife said after the first year it expects the transaction to add about 3 Canadian cents a share over each of the next three years.
“It will also increase our earnings capacity beyond our 2016 core earnings objective of C$4 billion,” Mr Guloien said. “This transaction, and the financing, maintain our strong capital position, and in no way inhibit our ability to pay dividends. In fact, it will enhance our ability to increase dividends.”
The insurer said the purchase will be partly funded with the sale of about C$2.1 billion of subscription receipts by way of a C$1.6 billion public bought deal and private placement to the Caisse de depot et placement du Quebec pension fund for C$500 million.
The balance will be paid for from internal funds and possible future sale of debt and equity.
Reuters
