Manulife buying John Hancock for $15 billion
Manulife Financial Corp.'s (TSX:MFC)$15 billion all-stock takeover of Boston's John Hancock Financial Services (NYSE:JHF)will make it the second largest life insurer in North America and Canada's No. 2 financial services company behind Royal Bank.
The deal, rumoured last week and officially announced late Sunday afternoon, is one of the biggest in Canadian corporate history.
Manulife's Dominic D'Alessandro will be president and CEO of the merged company, which will be headquartered in Toronto.
David D'Alessandro, the current chairman and CEO of John Hancock, will become chief operating officer and future president of Manulife when the transaction is complete. The two D'Alessandros are not related.
"We see this as a unique strategic opportunity to combine two exceptionally strong companies into a single, integrated, global market leader whose scale and capital base will drive even greater growth and shareholder value," Manulife's D'Alessandro said.
"The benefits of this transaction are many, strengthening our position in each of our core businesses," he said.
Under the terms of deal, John Hancock common shareholders will get 1.1853 Manulife common shares for each John Hancock common share. That works out to $37.60 US per share, a premium of 18.5 per cent to the September 24 closing price.
Manulife intends to invest up to $3 billion for the repurchase of its common shares.
The transaction is expected to add 8 cents a share to Manulife's net income (excluding one-time charges) by 2005, with additional net earnings because of the deal rising to 32 cents a share in 2005.
The deal is expected to be completed by the second quarter of 2004.
Based on stock closing prices from Sept. 24, the merged company will have a market capitalization of $34.7 billion and combined net income of about $2.2 billion.
The merger is not expected to result in major layoffs as the two companies operations do not overlap significantly.
"The number one business reason this merger will be successful is that this merger isn't built on cost savings," Manulife's D'Allessandro said.
"It's built on growth. Yes, there will be some cost savings, but the growth opportunities will be remarkable," he said.
John Hancock's Canadian subsidiary, Maritime Life Assurance Co., is included in the deal. It's still not clear if the company will operate under its current name or whether it will assume the Manulife brand. Maritime Life has 2,900 employees and $15 billion in assets. It was bought by John Hancock in 1969.
Manulife shares fell $1.44 to close at $39.41 Monday.