The second largest private life insurance company in Japan said it will acquire entire stake in the US medium-sized insurer for $5.71bn or $70 per share, which is priced at 35% premium to Protective Life’s daily average share price for the one-month period prior to 2 June.
Taking into consideration Protective Life's business operations and assets, Dai-ichi considers the price to be “fair and reasonable” and will fund the acquisition through issue of JPY250bn of shares, it said in its filing on the Tokyo Stock Exchange.
This is the largest-ever acquisition of a foreign company by a Japanese life insurer, the last being Tokio Marine Holdings's purchase of property and casualty insurer Philadelphia Consolidated Holding for about $4.7bn in 2008.
Once it receives approvals from Protective Life’s shareholders and from relevant regulatory authorities in Japan and the United States, the life insurance group will become a wholly-owned subsidiary of Dai-ichi.
The company expects to complete the transaction by December this year or January 2015, and will execute the buyout by merging Protective Life and DL Investment (Delaware), a 100% owned subsidiary of Dai-ichi Life established in the US.
As reported, Dai-ichi said earlier this week that it is considering making an investment in the US life insurance market.
Koichiro Watanabe, president of Dai-ichi Life said: “With a strong leadership team, vibrant and growing retail franchise and long track record of profitable growth organically and through the acquisition and integration of attractive businesses, Protective is the ideal platform for expansion.”
Protective Life, founded in 1907, is a medium-sized insurer with a presence in the individual life and annuities market with a market share ranking of 36th in the U.S, as measured by group premium income.
This strategic transaction will create the thirteenth largest global insurer, with total assets of $424bn, according to a joint statement by the companies.
'Global insurer representing Asia'
The acquisition fits into the company’s strategic plans of becoming a “global insurance group representing Asia”, through the acceleration of international business development.
Dai-ichi said it has been evaluating opportunities in developed economies in order to construct a geographically diversified business portfolio and focussed on the US market, where it feels the economy continues to grow on the back of population growth.
Following this, the company said its business composition in terms of premium income, profits and risk exposure will be more diversified globally, encompassing Japan, North America, and the Asia-Pacific region.
Dai-ichi said it expects Protective Life to act as the “group’s strategic growth platform in the North American region, achieving further growth and making enhanced contributions to group profits”.
The firm is also considering establishing a North American and Asia Pacific regional headquarters, and shifting towards a holding company structure. A regional headquarters for the Asia-Pacific region will be established in Singapore.
Dai-ichi expects profit and loss of Protective Life to be reflected on the group’s consolidated financial results from the fiscal year ending March 2016.
The current management team led by John D. Johns, chairman, president and chief executive of Protective Life, would continue to run the business with collaborative interaction with Dai-ichi Group’s governance structure.
