Pensions - Articles - Phoenix acquire AXA Wealth’s pensions & protection business


Phoenix Group Holdings announces that its subsidiary, Pearl Life Holdings Limited, has entered into conditional agreements with AXA UK plc to acquire AXA Wealth’s pensions and protection businesses.

 Commenting on the Acquisition, Phoenix’s Group CEO, Clive Bannister said: “The acquisition of the Embassy and SunLife businesses represents another important step forward in Phoenix’s growth strategy. The transaction meets our acquisition criteria and will generate additional cash for the Group which supports the proposed increase in Phoenix’s dividend. The Group has extensive integration experience and expertise and we believe that both the Embassy and SunLife businesses are a strong fit, benefitting both shareholders and policyholders alike. We will invest heavily to ensure a smooth transition of the two businesses from AXA to Phoenix and we are committed to delivering the highest level of service to both direct and IFA customers, as we do for our existing customers. Looking ahead, we believe there will be further consolidation in the UK life industry and we will continue to explore further opportunities as they arise.
 
 Acquisition highlights
 • Consideration of £375 million in cash payable on completion(1)
 • Acquisition to add £12.3 billion of assets under management and over 910,000 policies
 • Significant diversification benefits from the Acquisition, resulting in net capital synergies of c.£250 million(2) within 6 months of completion, inclusive of the impact of cost synergies of £10 million per annum(3)
 • Acquisition expected to generate cashflows of approximately £0.3 billion between 2016 and 2020 and £0.2 billion from 2021 onwards
 • Supports a proposed increase of the 2016 final dividend by 5% to 28.0 pence per share, equivalent to 56.0 pence per share on an annualised basis
 • Price / MCEV of 71%(4) and Price / Solvency II Own Funds of 85%(5)
 • Consideration funded from an equity placing and a new short-term debt facility
 • Phoenix expects to repay the new short-term debt facility within 6 months from completion, reducing the Financial Leverage ratio by c.2%
 
 Summary of transaction
 
 The Acquisition comprises a pensions and investments business, offering a range of propositions catering to both individual and corporate requirements (“Embassy”), and SunLife, a leader in the over 50s protection sector (“SunLife”), (together “the Acquired Businesses”).
 
 The consideration for the Acquisition will be satisfied by the payment of £375 million in cash, funded through a combination of the net proceeds of a placing of 22,542,000 new ordinary shares (the “Placing Shares”) in the Company (the “Placing”) and a new short-term debt facility (the “New Debt Facility”). The Placing is expected to represent approximately 9.99% of the Company’s existing issued share capital.
 
 Acquisition meets Phoenix’s stated acquisition criteria
 
 Phoenix has set clear criteria by which it assesses transactions and which are all met by the Acquisition. In particular:
 
 • “Closed Life focus”: Significant backbook of over 910,000 policies within Embassy and SunLife
 • “Value accretive”: The Acquisition is expected to generate cashflows of £0.3 billion between 2016 and 2020 and £0.2 billion of cashflows post 2020. The expected cash generation recognises significant net capital synergies of c.£250 million(2), inclusive of the impact of £10 million of run rate cost synergies per annum(3)
 • “Supports dividend”: Given the anticipated financial benefits of the Acquisition, Phoenix proposes to increase the final 2016 dividend per share by 5% to 28.0 pence. This would increase the dividend per share to 56.0 pence on an annualised basis, which the Board believes is a sustainable level at which to rebase the dividend going forward
 • “Maintains investment grade rating”: Phoenix expects to repay the New Debt Facility within 6 months from completion which will further reinforce the investment grade credit rating. The Group expects a reduction of c.2% in its Financial Leverage ratio following repayment of the New Debt Facility
 
 
 
  

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