Great-West Lifeco Inc. today announced it has entered into a definitive agreement with Canada Life Financial Corp. to acquire 100% of the outstanding common shares of Canada Life for $7.3 billion, or $44.50 per share.
The board of directors of Canada Life will recommend that its shareholders approve the transaction.
The Great-West offer trumps Manulife Financial Corp.’s $6.2 billion hostile bid for Canada Life launched in December 2002.
“This strategically motivated transaction will add another well-known financial brand and a powerful new distribution channel to our group of companies,” said Raymond McFeetors, president and CEO of Great-West and London Life, in a news release.
“As a result of this transaction, Great-West will emerge from the final stage of industry consolidation with a pre-eminent position in the Canadian life insurance industry and a significantly enhanced business in the United States,” McFeetors said.
David Nield, chairman and CEO of Canada Life said “The board of Canada Life is very pleased that it has been able to negotiate a friendly transaction with an outstanding Canadian company. This combination creates a winning scenario for shareholders and policyholders.”
The transaction provides Great-West with a leading market share in all key segments in Canada, driven by three complementary distribution channels with unmatched breadth and scale.
In the United States, Great-West Life & Annuity will integrate the operations of Canada Life, thereby providing more distribution opportunities and strong earnings’ accretion.
In Europe, where London Life and sister company Investors Group already operate, Great-West acquires significantly enhanced group and individual businesses in high-growth markets.
The terms of the agreement allow Canada Life shareholders to elect from one of the following alternatives (subject to pro ration) per Canada Life share:
To support the transaction, Power Financial Corp. has committed to invest $800 million to purchase 21.302 million common shares of Lifeco from treasury via private placement. Investors Group Inc. has also agreed to invest $100 million by purchasing 2.662 million Lifeco common shares from treasury.
The transaction will be effected by way of a capital reorganization. Details will be contained in a circular to be mailed to Canada Life common shareholders shortly, and they will be asked to vote on the transaction at a meeting of shareholders.
The transaction is subject to approval by regulatory authorities (including insurance and competition) in Canada, the U.S., the U.K., Ireland, Germany and Europe, as well as in other jurisdictions where the companies operate.
The deal is expected to close in the third quarter of 2003.