AXA pays XL premium to insure more stable future
- Author: Darren Santiago Mar 06, 2018,
Mar 06, 2018, 1:38
But it's not a done deal yet, completion of the transaction is subject to approval by XL Group shareholders and other customary closing conditions, including the receipt of required regulatory approvals, and is expected to take place during the second half of 2018.
It's the latest mega-deal in the insurance space.
Axa has signed up to buy 100% of XL Group for $15.3bn in cash (£11.1bn).
The French insurer said it was offering $57.60 for each XL share, representing a premium of 33 percent to XL's closing share price on March 2.
Axa will be paying the whole sum in cash, using €3.5bn of cash at hand, €6bn from the United States initial public offering (IPO) and €3bn of debt.
AXA ranks as Europe's second-largest insurer in terms of market capitalization behind Germany's Allianz, which had also been seen as a possible suitor for XL.
Axa said the deal would make the "leading global property and casualty (P&C) commercial line player across all lines (of business)".
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"In our view, the acquisition of XL fits AXA's strategy of growing in commercial insurance".
Response was muted, however, with AXA shares falling by five per cent and some analysis suggesting that the purchase price was overly high. XL, however, presents AXA with a different type of risk: "It is heavily exposed to the business of insuring against disasters".
The combination of Axa and XL would, on 2016 figures, have property and commercial lines revenue of €48bn.
The opportunity to acquire XL Group has led AXA to review its exit strategy from its existing U.S. operations4 which AXA now expects to accelerate.
Greg Hendrick will work closely with Doina Palici-Chehab, AXA Corporate Solutions' Executive Chairwoman, and Rob Brown, AXA Corporate Solutions' CEO, to build an integrated organization and leadership team for this new company.
The company expects the XL takeover to be cash accretive, and result in cost synergies of around $400 million per year, based on pre-tax earnings. Together with the planned IPO of AXA's United States operations4 (expected in 1H 2018 subject to market conditions) and intended subsequent sell-downs, this transaction would gear AXA further towards technical margins less sensitive to financial markets.