The Canadian Press

Manulife Financial Corp. (TSX:MFC), Canada’s largest insurance company, announced Wednesday it is issuing over $2.5 billion in common equity in a bought deal arrangement.

Upon closing, Manulife subsidiary The Manufacturers Life Insurance Co. will have access to the highest level of capital since it became a public company, the company said in a news release.

“We are positioning Manulife for the long term,” chief executive officer Donald Guloien said in a news release.

“We believe this transaction achieves the fortress level of capital necessary to buffer against more conservative economic scenarios and to position us to take advantage of highly attractive acquisition and growth opportunities.”

Manulife said a syndicate of underwriters led by Scotia Capital Inc. and RBC Dominion Securities Inc. has agreed to buy just over $2.5 billion in Manulife common shares at a price of $19. The public offering is expected to close on or about Nov. 30.

The company has granted the underwriters an over-allotment option, exercisable in whole or in part at any time up to 30 days after closing, to purchase up to an additional $375 million in common shares at the same price. Should the over-allotment option be exercised in full, the total gross proceeds of the offering would be just under $2.9 billion.

The estimated net proceeds from the offering will be approximately $2.413 billion, after deducting the underwriting fee and before the estimated offering expenses.

Funds raised will be used for general corporate purposes, which may include contributions of capital to its insurance and other subsidiaries, potential acquisitions or other growth initiatives, Manulife said.

Following the offering, the company also intends to retire approximately $1 billion in outstanding indebtedness under its credit facility with Canadian chartered banks using other cash resources of the company.

Chief financial officer Michael Bell said that while the issue is expected to be dilutive to the company’s earnings per share, Manulife believes that “strengthening its capital position is in the best long-term interests of the company and its shareholders.”

Manulife shares were up 18¢ or just under one per cent at $20.18 Wednesday on the Toronto Stock Exchange. Volume was over 5.2 million shares.