Manulife Financial says it’s buying Standard Life’s Canadian operations for about $4 billion.
“Several months ago, Standard Life decided to explore the sale of its Canadian operations through a competitive process,” says Donald A. Guloien, Manulife’s president and CEO. “We are delighted to be named the successful bidder.”
The deal would add $5.4 billion in AUM to Manulife’s Canadian mutual funds business, bringing total mutual fund AUM to $33 billion as of December 31, 2013 (on a pro forma basis). Manulife expects the integration to cost $150 million in the first three years, and then save $100 million per year.
Manulife says it was interested in buying Standard Life due to its strong roots in Quebec. In a release, the company says “there will be no significant immediate job losses.” It also plans to establish a senior leadership team based in the province.
“We fully expect to have more jobs in Quebec than Standard Life has at present. As Manulife has done in other transactions, we will choose the most capable people from each company,” the company added.
There was an existing relationship between Standard Life Investments and John Hancock (part of Manulife) to distribute investment products globally.
“It will broaden the range of asset management products and solutions available to our clients in Canada and around the world,” said Kai Sotorp, executive vice president, Global Wealth and Asset Management.
Standard Life, whose parent is based in Edinburgh, UK, is the fifth-largest life insurer in Canada. It has 2,000 employees, 1.4 million customers and $52 billion of assets under management.
“Manulife is well positioned to support our clients, intermediaries and partners in Canada going forward,” says David Nish, Chief Executive, Standard Life.
Guloien says that excluding transition and integration costs, after the first year the deal should add three cents in earnings per share over the next three years. He added that the deal and its financing maintain the company’s strong capital position and would “in no way inhibit our ability to pay dividends.”
In the release, Manulife states the deal is attractive because it increases earnings from fee-based businesses.
- Based on industry data from the Fraser Group and IFIC, the transaction would add $19.0 billion in assets under administration to the Canadian group retirement business, bringing total group retirement AUA as of December 31, 2013 to $40.9 billion on a pro forma basis.
- The transaction would also increase annual Canadian group benefits premiums and deposits from $7.5 billion to $8.3 billion on a pro forma basis for the year ended December 31, 2013.
- The closing of the transaction is subject to regulatory and shareholder approvals. It’s expected to close in the first quarter of 2015.
More to come.