Standard Life Plc revealed in an official statement that it has reached an agreement with the biggest life insurer in Canada – Manulife Financial Corp. to sell its Canadian unit in a deal estimated to about C$4 billion ($3.7 billion). The company is making this step to fund a bumper cash payout to investors, which amounts to about one fifth of its market capitalization.
In addition, the acquisition of Standard Lifes Canadian assets is to provide Manulife with the opportunity to expand its reach in the province of Quebec. As reported by Bloomberg, the Chief Executive Officer of Manulife Mr. Donald Guloien, shared in a conference call with reporters that the acquisition follows “Manulife’s growth strategy for its Canadian business – in particular wealth and asset management”.
A few months ago Standard Life offered its life insurance business in Canada, among of its largest outside the U.K., for sale. Company spokesman Barry Cameron revealed that the companys operations in Canada are growing, but “greater shareholder value” could be generated through a sale of the business than by keeping the unit.
On the other hand, the acquisition of Standard Lifes Canadian operations will allow Manulife to increase its dividend. As Manulifes Chief Executive Officer revealed, the deal pushes the company beyond its goal of C$4 billion in core earnings by 2016, and adds 3 cents annually to earnings per share over the next three years. After the acquisition, the assets of the company are expected to amount to C$637 billion.
Standard Life Plc added 8.62% to trade at GBX419.40 per share at 8:38 GMT, marking a one year change of +24.52%. The company is valued at £9.17 billion. According to the Financial Times, the 18 analysts offering 12-month price targets for Standard Life Plc have a median target of GBX399.00, with a high estimate of GBX460.00 and a low estimate of GBX320.00. The median estimate represents a 3.34% increase from the previous close of 386.10 pence.
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