Sun Life Financial Services of Canada Inc. announce this morning that it would buy Waterloo, Ontario-based Clarica Life Insurance Company for $7.3 billion. Clarica will become a wholly-owned subsidiary of Sun Life Financial Services of Canada Inc., maintaining the Clarica name. The combined Canadian operation will be based in Waterloo.

The combined operation will create the largest insurer in the Canadian industry with total revenues of $21.7 billion, assets under administration of $344 billion and total assets of $140.2 billion. It will also carry Canada’s largest customer base with approximately 7 million Canadian customers. In a joint release today the companies said the acquisition will create Canada’s largest group life insurance company.

Under the terms of the agreement, Clarica’s common shareholders will exchange each Clarica share for 1.5135 common shares of Sun Life. The transaction, which is subject to approval by the Minister of Finance, regulators in Canada and the U.S., and Clarica’s shareholders and voting policyholders, is expected to close in the second quarter of next year. Based on the 10-day volume-weighted average closing price of Sun Life Financial shares, the agreement values each Clarica share at $54.65.



“I am delighted to announce this agreement with Clarica. The cultural and business affinities between these two leading Canadian financial services companies create an excellent strategic fit. It rewards shareholders, benefits consumers and contributes to the strength of Canada’s economy,” said Donald A. Stewart, chairman and CEO of Sun Life Financial.

“The combination is expected to create lower cost structures, increased revenue and expanded distribution capabilities, which will deliver greater economic value to customers and shareholders,” added Stewart. “The transaction also represents a material step towards Sun Life’s goal of achieving leading positions in key North American markets, creating an even greater base for international expansion. The uniting of two companies with proven records of leadership, integrity, performance and customer focus will strengthen our position in an industry marked by increased consolidation and competition at home and abroad.”

Bob Astley, Clarica’s president CEO, said the combined Canadian operation will be more than the sum of its parts. “I view this as a tremendous opportunity for Clarica and all our stakeholders. This transaction positions us very well to continue growing and delivering on our brand promise to customers who are seeking clarity and trusted advice in making complex financial decisions. We are excited to build on our strengths in this country as well as participate in the growth of a dynamic international organization.”

“Canadians will benefit from enhanced value, choice, innovation and access to greater expertise by combining the capabilities of two leading financial services providers,” added Mr. Astley. “A transition team, led by me and made up of people from both companies, will drive the integration process, identifying the best possible approach for moving forward. Both companies have talented, capable people who will combine their skills and expertise to ensure the integration is as seamless as possible for customers, with minimal disruptions.”

Sun Life’s corporate headquarters will remain in Toronto. The combined Canadian operation will be based in Waterloo, while maintaining a significant presence in Toronto, Montreal and Ottawa. Sun Life’s U.S. operations will remain headquartered in Wellesley Hills, MA, and the two companies will determine how Clarica’s U.S. operations will be integrated as part of the transition planning process. Donald Stewart will remain chairman and CEO, and Bob Astley will become president, Canadian Operations. Mr. Astley will also continue as president and CEO of Clarica.

Excluding a one-time charge to be taken at closing, the acquisition is expected to be immediately accretive to earnings per share (EPS).

The exact impact on jobs will not be known until the integration planning process is complete, but it is anticipated that approximately 1,500 positions will be eliminated out of a combined total of 8,600. There will be no staff reductions related to this transaction prior to June 30, 2002. Displaced employees will receive transition support. A transition fund of up to $25 million will be established to support individuals in repositioning themselves for either internal or external roles.

Clarica’s shareholders and voting policyholders will receive information outlining the details of the transaction and will be asked to vote on the proposal at a date still to be determined. The Canadian regulatory approval process will start at the beginning of next year following the expiration of the transition period established by the Canadian government.

Merrill Lynch & Co. acted as financial advisor to Sun Life Financial for this transaction. Goldman, Sachs & Co. and TD Securities Inc. acted as financial advisors on behalf of Clarica Life Insurance Company.

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