LONDON -- French insurance group Axa won the battle for British composite insurer Guardian Royal Exchange PLC on Monday with an agreed offer valued at around pounds 3.4 billion ($5.6 billion).
Axa, based in Paris with operations stretching across Europe, will buy GRE through its British arm Sun Life and Provincial Holdings PLC, in which it has a 71.6 percent stake.
Under the deal, GRE shareholders will receive 249 pence in cash and 0.243 new Sun Life shares for each GRE share, valuing GRE stock at around 389 pence.
With its offer unanimously recommended by GRE directors, the French insurance group pulled off a coup against tough competition from British rival Royal & Sun Alliance Insurance Group PLC and pan-European mutual group Eureko.
Sun Life will ultimately retain only GRE's Britain and Ireland operations for a net consideration of pounds 1.88 billion.
Its British arm is to sell GRE Overseas to Axa for pounds 972 million in cash. It will also sell the German operations, GRE Germany, to AXA Colonia, which is 73 percent owned by Axa, for 1.66 billion marks while the U.S. business, GRE U.S., will be sold to Liberty Mutual for $1.465 billion.
Out of the proceeds, GRE will spend 292 million pounds to repay external foreign-denominated debt.
Sun Life said the deal would enhance earnings in 1999 and thereafter while Axa forecast it would dilute earnings slightly in 1999 but would be neutral in 2000 and positive in 2001.
The acquisition boosts Axa's presence in Britain - where it is already the main sponsor of the English FA Cup soccer championship - and creates Britain's fourth-largest insurance group in terms of asset management with about pounds 55 billion of funds under management. It will also be the third-largest general insurer and life insurer in Britain.
After the acquisition is complete, the enlarged group's life insurance business will account for 61 percent of its business while general insurance will provide for 29 percent and healthcare 5 percent.
The takeover will reduce the combined cost base of Sun Life and Guardian Royal by pounds 50 million on an annualized basis by the end of 2001.
Andy Homer, chief executive of Axa Insurance, will head the general insurance division of the enlarged group while Les Owen, the chief executive of Axa Sun Life, will head the bigger life operation.
The companies said there would be some redundancies but did not specify how many, although analysts expect the number to run into hundreds. The Banking Insurance and Finance Union, which represents British finance sector workers said, it had been assured that compulsory layoffs would be avoided wherever possible.
The purchase will be funded by the issue of up to around 224 million new Sun Life shares and up to pounds 2.21 billion in cash, for which Axa said a bank facility had already been arranged.
Sun Life said it was expecting to show pretax profits of pounds 318 million and net written premiums of pounds 4.2 billion for the fiscal year to Dec. 31, 1998.
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