Dutch Insurer Buys Transamerica
European insurer Aegon N.V. agreed Thursday to acquire Transamerica Corp. for $10.8 billion in stock, cash and debt, as the Dutch-based company moved to bolster its life insurance business in the United States.
Aegon (AEG) will pay $9.7 billion - 70 percent stock and 30 percent cash - and assume $1.1 billion in debt. That represents a $78 a share price, or a 34.5 percent premium over Transamerica's (TA) closing price Wednesday of 57 5/8, Aegon said.
Transamerica roared ahead 15 7/8 to 73 7/16 in trading Thursday morning, while U.S.-listed shares of Aegon climbed 5 5/8 to 100 3/8. The stock has been rising in recent months amid constant takeover talk, which grew especially hot earlier this week.
With the acquisition, Aegon would shoulder its way into third place among life insurers in the United States behind leaders behind Prudential and Metropolitan Life. The company, which also bought the insurance business of Providian Corp. in 1997 for $3.6 billion, is focusing increasingly on life insurance and retirement-savings vehicles.
The addition of Transamerica, best known for its pyramid-shaped headquarters in San Francisco, also gives Aegon a foothold in other businesses such as commercial lending, equipment leasing and real estate services.
Though Aegon executives said they haven't decided what to do with those businesses, analysts expect the company to sell them off. In the past few years, it has been shedding non-core operations. Aegon recently agreed, for instance, to sell its Worldwide Insurance auto insurer unit to American Financial Group.
Aegon said the Transamerica deal will boost earnings per share at least 3 percent in 1999 and 2000, assuming that the acquisition is completed by mid-year. Barring special circumstances, the insurer said earnings should grow 18 to 20 percent in the current fiscal year and 12 to 15 percent on a per-share basis.
In addition, the combined entity will be able to save $150 million annually in expenses starting in three years.
Aegon, the second largest insurer in Europe and the third biggest globally, just opened an office in China. The acquisition of Transamerica will strengthen its business in Asia and Canada, where the American insurer also has operations.
Written By Jeffry Bartash, CBS MarketWatch