Winnipeg Free Press - PRINT EDITION

Mega-purchase for Great-West

Insurance giant buys Irish Life from government for $1.75 billion

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More than a year after first getting very close to pulling the trigger on the company, Great-West Lifeco has now succeeded in acquiring Irish Life Group Ltd. for $1.75 billion from the Irish government.

The Winnipeg-based insurance giant has long been a player in the Irish market through its subsidiary, Canada Life, and now becomes the dominant player in a market that is on the economic upswing.

Irish Life has about one million customers and $50 billion of assets under management while holding about 28 per cent of the life, pension and investment-management market in Ireland.

The Irish government acquired it a year ago at a similar price when it was forced to bail out its former parent company, Permanent TSB Bank.

"We are acquiring a first-class franchise here," said an upbeat Great-West Lifeco CEO Allen Loney, who grew up 160 kilometres north of Dublin and has had dealings with Irish Life for more than 40 years.

"This company has tremendous distribution -- with diversity and depth -- a great product range and first-class technical support to its field forces and to service its clients."

In an interview from Dublin on Tuesday, Loney said in many ways, Irish Life resembles a smaller version of GWL's standard-setting Canadian operations.

Great-West Lifeco began its pursuit of Irish Life when an auction process was launched in September 2011 but withdrew in November that year due to the European sovereign-debt and banking crisis.

Loney said negotiations resumed about 21/2 months ago in November 2012 after the economy began to show signs of improvement.

Great-West Lifeco will pay for the deal with cash, most of which it intends to raise in $1.25 billion worth of new equity, about half of that coming from parent company Power Financial Corp. and a much smaller amount from sister company IGM Financial Corp.

The deal is being heralded from just about all sides as a winner.

The sale is part of the Irish government's efforts to reduce its deficit by 2015 to three per cent of gross domestic product. It currently hopes to reduce this year's deficit to below 7.5 per cent of GDP.

"I am very pleased to announce that an agreement has been reached with Great-West Lifeco for the sale of Irish Life," Ireland's finance minister, Michael Noonan, said in a statement Tuesday.

"Today's deal is the first time during this crisis that a company in which we have invested has been returned fully to private ownership."

Noonan said the transaction, which requires regulatory approvals, provides Irish taxpayers with a "full return on its investment in Irish Life."

In North America, markets pushed GWL's stock up 65 cents to a new 52-week high of $27.43

The transaction, scheduled to close this July, is expected to boost GWL's consensus 2014 forecast earnings by $215 million or 10 per cent, adding 10 cents or four per cent to forecast 2014 earnings per share.

It is expected to result in pre-tax cost savings of $54 million with the combination of the two Dublin head offices and back-office synergies. Irish Life employs more than 2,000 people in Ireland and GWL's Canada Life operation there has 600 employees.

It's expected there will be some staff reductions in Ireland, but Loney said it's hoped all job reductions will be achieved by "voluntary redundancy."

The deal may also be seen as a break in the lengthy recent record of dismal economic dynamics in Europe.

Loney said his company may have paid more for Irish Life now than was being contemplated 15 months ago when discussions were first held, but the business has grown since then and the Irish economy is now in better shape.

"The world has moved forward and Irish Life has earned quite a bit of additional capital and earnings during that period, making it a more valuable company," Loney said. "

As well, the economy and fiscal situation in Ireland and Europe is very much brighter. It was not bright at all 15 months ago; it was very dark. We feel we paid a very fair price for this opportunity to acquire the leading the life insurance franchise in Ireland."

Loney said the impact the deal will have on its Winnipeg head-office operations where it employs about 3,500 will likely only be felt on the morale side of things.

"It has to be heartening (to Winnipeg employees) that the corporation of which they are a part has taken a big step forward like this in the global life insurance market," he said.

 

-- with files from The Canadian Press

martin.cash@freepress.mb.ca

Plenty of zeros

 

WINNIPEG companies' billion-dollar deals:

 

-- $7.3 billion (2003) -- Great-West Lifeco acquires Toronto-based Canada Life in what was then referred to as a "friendly" merger.

-- $4.6 billion (2007) -- Great-West Lifeco acquires Boston-based Putnam Investments Trust.

-- $4.15 billion (2001) -- Investors Group (now called IGM Financial) buys Mackenzie Financial.

-- $3.5 billion (2000) -- Canwest Global Communications Corp. buys most of the Canadian publishing and Internet assets of Hollinger Inc. (and likely marked the beginning of the end for Canwest).

-- $2.9 billion (1997) -- Great-West Lifeco buys London Life. At the time, there was much consternation about job losses in London, Ont., but the company now has twice as many employees as it did in 1997.

-- $2.3 billion (2007) -- Canwest Global Communications Corp. (in a complicated partnership with Goldman Sachs) buys Alliance Atlantis Communications Inc.

-- $1.4 billion (2004) -- MTS buys Allstream in a deal that featured an activist-shareholder revolt.

Republished from the Winnipeg Free Press print edition February 20, 2013 B5

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