Thursday, September 04 11:23:51
Manulife Financial Corp and Britain's Standard Life have agreed a near-$4 billion deal for the Canadian operations of the British insurer as part of a broader global tie-up.
The C$4 billion cash deal will significantly expand Manulife's presence in Quebec and make Standard Life's earnings less volatile while helping it to continue to grow its asset management arm, analysts said.
Manulife said the transaction would boost earnings after the first year and more than double its presence in the largely French-speaking Canadian province, while Standard Life said it will return more than half of the sale proceeds to shareholders.
The companies will also expand an existing wealth and asset management partnership, with Manulife distributing Standard Life funds in Canada, the United States and Asia, while Standard Life reciprocates in the British retail market.
"I think this is a good deal for Manulife," Morningstar analyst Vincent Lui said, noting that Standard Life is a pioneer in areas such as liability-driven investments and that Manulife can benefit from the know-how gained via the acquisition.
Lui also said that the access and growth opportunities in Quebec are a huge bonus.
"Quebec is a market that has been to an extent ignored by a lot of the large Canadian insurers, so this deal gives Manulife a quick strategic entry point into that market," he said.
Analysts were even more positive on the benefits for Standard Life, describing the deal as "excellent" and "fabulous" in notes to clients.
Panmure Gordon's Barrie Cornes hailed what would be an improved risk profile of the company, saying: "Given the Canadian business includes a capital-intensive book of legacy spread/risk business, the disposal will substantially reduce Standard Life's overall capital requirements, volatility and exposure to market risk." (Reuters)
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