(Alliance News) - Phoenix Group Holdings PLC on Friday said it has agreed to acquire Swiss Re Group's UK business ReAssure Group PLC 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.
Phoenix's solvency II surplus is expected to rise to GBP4.2 billion, from GBP3.0 billion, giving a coverage ratio of 148%.
The company is also expecting net integration costs of GBP800 million. These synergies include annual post-tax cost savings of GBP40 million per annum by 2023.
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%.
As a result, Swiss Re and MS&AD will be entitled to a board seat each.
Phoenix Group's largest shareholder, FTSE 100-listed Standard Life Aberdeen PLC, will have a 14.5% stake in the enlarged company and retain its board seat.
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. Swiss Re ended the session in Zurich at CHF105.80 for a CHF34.64 billion total equity value.
By Paul McGowan; paulmcgowan@alliancenews.com
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Phoenix Group Holdings (PHNX)