£3.2bn deal for consolidator
Phoenix takes European crown after acquiring ReAssure
Standard Life House: now home to Phoenix Group
Phoenix Group, the Edinburgh-based life and pensions firm, is acquiring rival zombie funds company ReAssure Group, chaired by former Scottish Widows chief Archie Kane, in a £3.2 billion deal.
The cash and shares acquisition from ReAssure’s parent Swiss Re and MS&AD Insurance Group confirms Phoenix as Europe’s largest life and pensions consolidator.
It adds £84bn of assets under administration, creating an enlarged group with £329bn of AUM and 14.1 million policies. Completion of the acquisition is targeted for mid-2020.
The deal follows the purchase of assets from Axa and then Abbey Life from Deutsche Bank, and last year’s £3.3bn acquisition of Standard Life Aberdeen’s life assurance operations, which catapulted Phoenix into the London Stock Exchange’s top index. It runs the business from the former Standard Life offices in Lothian Road, Edinburgh.
Phoenix was tipped in the summer to make a bid for ReAssure following the latter’s decision to cancel a planned flotation.
It expects the deal to generate additional cash flows of about £7bn, of which £2.7bn is expected to be generated between 2020 and 2023 and a further £4.3bn from 2024 onwards. It takes total long-term cash generation of the enlarged group to £19bn.
It aims to achieve cost and capital savings of £800 million and supports a proposed 3% increase in the dividend.
Following the Acquisition, Swiss Re will hold 13% to 17% of the enlarged group while MS&AD will between 11% to 15%, depending on Phoenix’s share price at completion. Both will be invited to appoint one non-executive director to the Phoenix Group board and will otherwise benefit from the same governance rights as Standard Life Aberdeen.
Phoenix’s strategic partner and current largest shareholder, Standard Life Aberdeen will own about 14.5% and continue to have the right to appoint one non-executive director to the Phoenix Group board.
Martin Gilbert and Keith Skeoch of Standard Life Aberdeen with Clive Bannister (centre) after last year’s deal
Commenting on the acquisition, the group’s CEO, Clive Bannister, said: “This is a highly attractive acquisition for Phoenix that follows our growth strategy and delivers value to our shareholders.
“The acquisition will contribute £7 billion of incremental cash generation and give us the opportunity to capture significant cost and capital synergies. The purchase price, at 91% of ReAssure’s pro-forma Solvency II Own Funds, is attractive; as is the efficient financing structure. Together, this enables us to maintain our balance sheet strength.”
Christian Mumenthaler, group CEO at Swiss Re said: “We are pleased to have found a strong buyer for ReAssure Group, delivering on our stated objective of deconsolidating this business. Phoenix is a natural acquirer of ReAssure and has a proven track record of delivering value to both shareholders and customers.”
Keith Skeoch, CEO, Standard Life Aberdeen, said: “Today’s announcement by Phoenix illustrates the substantial consolidation opportunities that exist within the UK and European insurance sectors which was a key factor in our making our strategic investment in Phoenix.
“We will be working with Phoenix to understand the additional opportunities that the proposed acquisition creates for Standard Life Aberdeen.”