Executives of Manufacturers Life Insurance Co. are confident that their demutualization proposal will be approved by policyholders in a vote scheduled for July 29 at the company’s Toronto offices. If a two-thirds majority of ballots cast supports the proposal, Manulife will become the second insurer to receive the blessing of its policyholders to go ahead with demutualization.
At the same time, the executives will be hoping their meeting does not involve the name-calling and accusations of fraud, self-interest and deception that marred the Mutual Life Assurance Co. of Canada demutualization vote held on June 10 in Waterloo, Ont. Still, that final vote was 97% in favour of going public.
So far, the path to public ownership has been a long one for Manulife. It effectively began in late 1997, when the company made its decision to demutualize. At that time, management began interviewing investment bankers to help launch the public company, eventually settling on ScotiaMcLeod Inc., Merrill Lynch Canada Inc. and Credit Suisse First Boston.
During the last 18 months, there have been periodic meetings with insurance regulators in Manulife’s four main territories – Canada, the U.S., Hong Kong and the Philippines. The meetings also involved securities regulators, since plans call for listing on the exchanges in those countries.
The insurer won’t go ahead with the plan unless it has final approval of all regulators in those regions. “If we mess that up, we’ve got a real issue,” Simons says.
If the July 29 meeting produces majority vote in favour of the plan, policyholders in the four regions will receive a letter asking whether they want to receive their payouts as cash, shares, or combination. While eligible policyholders in 124 countries get a vote, only those in Canada, Hong Kong, the U.S., and the Philippines will have the option of choosing shares. Those in the other 120 countries will receive cash only, freeing it from most regulatory requirements in those jurisdictions. It has as few as one policyholder each in countries such as Egypt and Turkey, with larger blocks in Britain, Australia and Singapore.
Total cash requirements, plus expenses, will become the target for the initial public offering to be arranged by the three main investment bankers and a syndicate.
“Once we’ve got [approval in] the four jurisdictions, we need to address people in a very focused way about things like social benefits. We want to be sure we highlight those individually,” he says.
Manulife and its investment bankers will also organize road shows to promote the IPO, especially for institutional investors such as pension fund managers and mutual fund managers and other insurers, which are expected to be the largest group of early investors. “The company has previously submitted prospectus filings in Canada and the U.S. ,” says Edwina Stoate, Manulife’s vice president, investor relations. “That’s the document we will be using for marketing.”
Stoate says Manulife will ask regulators in the other two regions for approval if the vote passes. If the plan unfolds on schedule, the next step will be the pricing of the shares, and listing on stock exchanges in Toronto, Montreal and New York. The company also hopes to get regulatory approval to list on exchanges in Hong Kong and the Philippines.
In effect, the start of trading ends Part One of Manulife’s demutualization.
Part Two could end with a hostile takeover. Federal regulations prohibit hostile takeovers of demutualized companies for two years, which is much too short, says Domenic D’Alessandro, Manulife’s president and chief executive officer, who prefers a five-year ban.
But it all hinges on the vote.
If policyholders vote yes, as they are expected, it will be the beginning of a new chapter for the insurance industry in Canada.