Resolution Strikes a $4.11 Billion Deal for UK Insurance Giant AXA SA

Last week there was buzz that Resolution Ltd. was in talks to purchase the United Kingdom life insurance operation of AXA SA, which is the second-biggest insurer in Europe. It's another sign of the increased merger activity in the financial services industry. But of course, the transactions can be dicey as seen with Prudential's failed $35.5 billion proposed acquisition of the Asian life insurance unit of AIG (AIG).

Yet this is not stopping dealmakers. Yesterday Resolution confirmed that it is plunking down $4.11 billion for AXA's UK holdings (both companies are listed on European exchanges). It's a healthy valuation and the financing appears to be solid.

A Look at Resolution


Over the years, Clive Cowdery has made a fortune buying and selling UK life insurance companies. As the head of GE's European insurance buyout operation, he posted 28% annual returns from 2004 to 2008.

So why not try it again? In 2008, Cowdery started a buyout vehicle -- Resolution -- to capitalize on the low valuations in the industry. Interestingly Cowdery's strategy has not changed: buy out several life insurance companies, merge them and then realize the value by taking the entity public. Oh, and to save taxes, he has located Resolution in Guernsey.

The first deal came a year ago with the purchase of Friends Provident. It's the 11th largest life insurance company in the UK and has been renamed "Friends Life."

Now, with the acquisition of AXA's operation, there will certainly be more scale. The expected cost synergies are for 75 million pounds in annual savings over three years. But Cowdery also realizes he needs to find ways to boost revenues and this is likely to come from an improved product mix.

More Dealmaking


To pull of the AXA deal, Resolution is in the process of a $3 billion rights offering. Already, about 52% of shareholder have subscribed and the commission rate is at a relatively low 1.75%. All in all, this means there is healthy investor interest in the transaction.

As for AXA, the company will have a pile of cash and will also probably shop for other deals. And yes, the sweet spot will likely be for financial services companies in Asia, where the markets continue to grow at a rapid clip.
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