Swiss Life extends German expansion with MLP deal

ZURICH/FRANKFURT (Reuters) - Insurer Swiss Life (SLHN.VX) is boosting its German presence by buying a stake in pension sales firm MLP (MLPG.DE) and taking full control of rival AWD AWDG.DE for 427 million euros ($639.5 million).

It said the move means it is limiting its share buyback program to the 1 billion Swiss francs ($923.4 million) already planned for this year, ditching 1.5 billion planned for 2009.

The share buyback cut as well as well as concerns about the difficulty cracking the German market pushed Swiss Life shares down 7 percent, while MLP, which has gained almost 20 percent this year on takeover speculation, tumbled 9 percent.

MLP and AWD are Germany's two main independent financial advisers and are seen as complementary, with MLP focusing on selling pension policies to well-paid professionals, while AWD sells similar products to less well-off customers.

Swiss Life said it did not plan to raise its stake in MLP beyond the 26.75 percent it has now bought without consultation and said it was not looking for a hostile takeover, but analysts said the group would eventually seek a majority holding.

"We expect Swiss Life will try to get the majority of MLP as soon as a possibility will occur. We think Swiss Life sees a lot of potential in MLP's wealthier clients and established distribution capacity," Merck Finck & Co wrote in a client note.

MLP founder Manfred Lautenschlaeger, who has repeatedly voiced his opposition to a sell out in recent months, said on Thursday he planned to keep his full stake in the company. The Lautenschlaeger family holds nearly a third of MLP.

Swiss Life boss Rolf Doerig said he was hopeful for constructive talks with Lautenschlaeger, but said he did not plan to merge the MLP and AWD brands.

Awash in cash after selling its Belgian and Dutch operations and the Banca del Gottardo banking unit last year, Swiss Life has shifted focus to expansion in Germany, Austria and central Europe, using some of the proceeds to buy AWD in December.

"IRRATIONAL DECISION"

"One of the worst scenarios possible has materialized ... Once more Swiss Life proved to be irrational taking decisions when in physical possession of cash," said Landsbanki Kepler analyst Fabrizio Croce.

Swiss Life shares were down 6.7 percent to 254.25 francs at 0922 GMT, while MLP shares were down 7.7 percent at 12.71 euros. AWD shares jumped 31 percent to 28.29 euros.

MLP said Swiss Life's move had come without its consent and said its independence was an essential to its business model.

Swiss Life bought the MLP stake from Carsten Maschmeyer -- the founder of AWD -- for an average price of 11.72 euro per share or a total sum of 307 million euros, the group said.

Swiss Life's also increased its holding in AWD to 96.71 percent, buying Maschmeyer's remaining 10.46 percent stake for the original public tender offer price of 30 euros per share, or around 120 million euros.

Swiss Life also said it plans to squeeze out remaining AWD shareholders and delist the firm sometime in 2009.

Speculation has surrounded MLP since Swiss Life bought most of AWD last December. Swiss Life said it and AWD were currently working on a joint strategy to target markets outside Germany and Switzerland, with an initial focus on Austria.

Maschmeyer will also take a 3 percent stake in Swiss Life by mid 2009 worth at least 300 million euros.

Swiss Life said the deal was subject to the approval of competition authorities. Germany's Bafin regulator said it would wait to see what share purchases were registered in the coming days before examining Swiss Life's involvement in MLP.

AWD founder Maschmeyer had previously tried to take over MLP but talks ended without a deal in April 2007.

MLP advisers are paid purely on commission for products they sell. The mid-cap financial adviser targets potential clients when they are students, focusing on those with professions that promise to be lucrative such as law.

Its sales force is made up in part of doctors and other professionals who ditch their jobs to sell investment policies to people working in their old professions.

MLP makes much of its money from selling pension policies. It is working up other lines of business such as selling pension products to companies as well as financing the building of doctor's practices.

(Additional reporting by Emma Thomasson, Arno Schuetze in Hanover; Editing by Louise Ireland)