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(Alliance News) - Phoenix Group Holdings on Friday said it has agreed to acquire Swiss Re Group's UK business ReAssure Group for GBP3.25 billion.
Back in July, SwissRe suspended plans for a London IPO of life insurance closed-book consolidator ReAssure, citing a poor global economic outlook and worries about a possible non-deal Brexit.
At the end of June, ReAssure had set the price range for a July initial public offering at between 280 pence and 330p per share, implying a market capitalisation between GBP2.8 billion and GBP3.3 billion. The IPO was intended to consist of insurance giant Swiss Re selling shares in ReAssure, taking its stake to below 50% from 75% currently.
Phoenix said on Friday the new deal will make it Europe's largest life and pensions consolidator - taking the assets under management in the company's Heritage unit to GBP329 billion from 14.1 million policies.
Phoenix said the acquisition will generate GBP7.0 billion in additional cash flows "over time", with about GBP2.7 billion expected between 2020 and 2023, with a further GBP4.3 billion onwards.
The FTSE 100-listed firm will pay a total consideration of GBP3.25 billion to Swiss Re and MS&AD Insurance Group Holdings Inc through a combination of shares and cash.
Phoenix will pay GBP1.2 billion in cash, funded from debt facilities and cash on hand. The company will then issue shares to Swiss Re for the remainder, part of which will be transferred to MS&AD.
Following the deal, Swiss Re and MS&AD will hold about 28% of the enlarged Phoenix combined, with Swiss Re holding between 13% to 17% and MS&AD holding between 11% and 15%.
Phoenix Group's largest shareholder, FTSE 100-listed Standard Life Aberdeen, will have a 14.5% stake in the enlarged company.
The deal is expected to be completed by mid-2020.
Phoenix shares closed at 739.00 pence in London on Thursday, giving a GBP5.33 billion market capitalisation. They were up 1.8% in early trade Friday at 752.00p.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.2% at 7,155.04
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Hang Seng: up 1.0% at 26,487.17
Nikkei 225: closed up 0.2% at 23,354.40
DJIA: closed up 28.01 points, 0.1%, at 27,677.79
S&P 500: closed up 0.2% at 3,117.43
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GBP: flat at USD1.3156 (USD1.3150)
EUR: firm at USD1.1106 (USD1.1096)
Gold: down at USD1,473.20 per ounce (USD1,477.30)
Oil (Brent): down at USD63.30 a barrel (USD63.72)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Friday's Key Economic Events still to come
OPEC and non-OPEC meeting in Vienna, Austria
0830 GMT UK Halifax house price index
0830 EST US non-farm payrolls and unemployment for November
1000 EST US monthly wholesale trade
1000 EST US University of Michigan survey of consumers
1500 EST US consumer credit
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China said it will offer a tariff waiver to "some" imports of US soybean and pork, in the latest sign of easing trade tensions between Beijing and Washington. The two sides are working towards a partial deal that includes a promise to increase the purchase of US farm produce. "The Customs Tariff Commission of the State Council is carrying out the exclusion of some soybeans, pork and other commodities based on applications from enterprises," the finance ministry said in a statement.
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US Treasury Secretary Steven Mnuchin told lawmakers the administration is supportive of transitioning China away from eligibility for cheap loans from the World Bank, citing the country's global economic position and human rights issues. Mnuchin testified Thursday in Congress and said that while the US cannot veto "every single loan," Washington does wield influence over the bank, which is meant to help countries develop by supplying low interest capital. World Bank lending to China - the world's second largest economy - hit USD2.4 billion in 2017 but has come down to about USD1.4 billion in 2019, according to the bank's website. Meanwhile, a key US senator pushed the World Bank to halt USD50 million in funding for a project in western China, citing the mass internment of Muslim-minority groups in the region.
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North Korea has threatened to resume referring to US President Donald Trump as a "dotard", raising the prospect of a return to a war of words with a negotiating deadline approaching. Pyongyang has set Washington an end-of-year time limit to offer it new concessions in deadlocked nuclear negotiations, and has said it will adopt an unspecified "new way" if nothing acceptable is forthcoming. Trump and North Korean leader Kim Jong Un – whose countries and their allies fought each other to a standstill in the 1950-53 Korean War – engaged in mutual insults and threats of devastation in 2017, sending tensions soaring before a diplomatic rapprochement the following year. But denuclearisation negotiations have been at a standstill since a summit in Hanoi broke up in February.
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UK Prime Minister Boris Johnson will face the leader of the opposition, Jeremy Corbyn, in a head-to-head debate later, after he was berated by Andrew Neil for refusing to do an interview on his BBC show. Neil said that if the prime minister is expected to face the likes of Donald Trump and Vladimir Putin then he should be able to sit down for a half-hour interview with him. Johnson has been accused of "running scared" from scrutiny by avoiding in-depth questioning from the veteran broadcaster, even though rival leaders, including Corbyn, have taken part. The prime minister, who has also refused to do an interview on ITV, will debate Corbyn on the BBC on Friday night, with less than a week to polling day.
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UK high street retailers suffered a lacklustre November in the critical build-up to Christmas as shoppers held off on spending ahead of Black Friday, figures show. In-store sales declined by 1.9% year-on-year in November from an already negative base of minus 2.6%, according to BDO's High Street Sales Tracker. Figures across the month suggest that discounting has become increasingly important for driving consumer spending, with retailers experiencing a lacklustre month before a substantial increase in sales the week of Black Friday.
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Fewer people in the UK have been found permanent jobs by recruitment agencies amid continued uncertainty over Brexit and the general election, a new study suggests. Research among 400 recruitment and employment firms indicates companies are delaying or even cancelling plans to hire staff. The uncertain outlook has also affected the number of vacancies and candidates looking for work, the Recruitment & Employment Confederation and KPMG said. Their research found the number of candidates looking for work through recruitment agencies had fallen sharply in recent weeks.
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The pace of Germany's industrial production decline accelerated in October, Destatis reported on Friday, with the reading well short of expectations. October's industrial production was 1.7% lower on the prior month, after a 0.6% month-on-month decline in September. On a yearly basis production was 5.3% lower, from a revised 4.5% decline in September. The September annual figure had previously been reported at a 4.3% decline. According to FXStreet, economists had forecast a 0.1% rise in month-on-month production in October, and a 2.8% yearly decline.
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BROKER RATING CHANGES
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MAINFIRST RAISES IAG TO 'OUTPERFORM' (NEUTRAL)
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PEEL HUNT INITIATES IAG WITH 'BUY' - TARGET 665 PENCE
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DEUTSCHE BANK INITIATES IBSTOCK WITH 'BUY' - TARGET 289 PENCE
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CITIGROUP RAISES BRITVIC TO 'BUY' ('NEUTRAL') - TARGET 1070 (1050) PENCE
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COMPANIES - FTSE 100
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Home builder Berkeley Group reported a 31% fall in pretax profit for the six months to September to GBP276.7 million, with revenue down 44% to GBP930.9 million. However, Berkeley said this profit drop was expected and simply represents profitability returning to normal levels. The decline was due to a number of central London projects finishing during the half. Berkeley said it was a "good" start to the year. It is on track to deliver GBP3.3 billion of pretax profit in the six years to 2025, and also on track to return GBP280 million per year in the same period.
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Associated British Foods said its Sugar business will benefit "materially" from a rise in prices and reduced costs in its year ending September 2020, with the Grocery unit set for "strong" profit and margin growth. Primark has a solid pipeline of new sites, AB Foods continued, with the margin to reduce "only" a small amount year-on-year. Speaking at the company's annual general meeting Friday, Chair Michael McLintock said the firm continues to expect adjusted earnings per share growth in its new financial year.
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COMPANIES - FTSE 250
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The UK Competition & Markets Authority has accepted remedies put forward by FirstGroup and partner Trenitalia, after the regulator expressed competition concerns on 21 routes in the West Coast rail franchise. The franchise can now be awarded without the need for a phase two investigation, it said.
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The CMA also has found Stonegate Pub Co's GBP3 billion deal for Ei Group does not create competition concerns on a UK-wide basis. However, it has identified competition concerns in 51 local areas, and has now demanded the two suggest measures to overcome these concerns. If they do not, the CMA will launch a phase two investigation.
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COMPANIES - INTERNATIONAL
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French construction firm Vinci's Vinci Energies has agreed to buy Schneider Electric's Converse Energy Projects, which specialises in energy distribution projects in Germany. The unit generated revenue of EUR100 million in 2018 and employs 300 people. No financial details of the deal were given. This transaction follows the French electrical equipment and software firm's strategic review announced alongside its 2018 results, with Schneider wanting to focus on core energy management and industrial automation offerings.
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Nearly 6,000 sexual assaults, including more than 450 cases of rape, were reported to Uber Technologies in the US in 2017 and 2018, the ride-sharing company said, as it faces increasing pressure to cope with complaints of abuse. The safety report, which details reports of attacks on both passengers and drivers, is the first time Uber has publicly disclosed the figures. The report also revealed 19 fatal assaults related to the company over the two-year period.
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Friday's Shareholder Meetings
Whitbread (re revised remuneration policy)
Verseon Corp (re AIM cancellation)
Eddie Stobart Logistics (re sale of 51% stake in operating subsidiary to DBAY)
Associated British Foods
James Halstead
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By Tom Waite; thomaslwaite@alliancenews.com
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