Desjardins to acquire State Farm's assets in Canada
TORONTO (Reuters) - Canada's Desjardins Group said on Wednesday that it would buy State Farm Canada's businesses in property and casualty and life insurance, as well as its Canadian mutual fund, loan and living benefits companies.
The exact terms of the transaction were not disclosed, but the businesses were being valued at around C$1.6 billion (US$1.46 billion) given the size of the cash infusions being made by the parties involved.
The deal would transform Desjardins into the second-largest property and casualty insurance provider in Canada, with annual gross written premiums of about $3.9 billion, the Quebec-based cooperative financial group said.
The deal, which is expected to close early in 2015 after necessary regulatory approval, would put Desjardins behind Canadian property and casualty market leader Intact Financial Corp (IFC.TO), which sells insurance products under its namesake brand, as well as banners such as Grey Power and Belairdirect.
The transaction marks the latest move toward consolidation in the Canadian P&C insurance market, as companies jostle to gain scale and a competitive edge. Intact in 2011 bought Paris-based AXA Group's Canadian insurance business for C$2.6 billion, while in 2008 Fairfax Financial Holdings Ltd (FFH.TO) bought the portion of Northbridge Financial that it did not already own for C$686 million.
As part of the deal, State Farm will invest C$450 million in Desjardins Group's property and casualty insurance business after the deal closes. That business also has commitments for investments of C$200 million from French cooperative financial group Crédit Mutuel and about C$700 million from Desjardins itself.
Separately, Desjardins said some of its other subsidiaries were allocating C$250 million in capital toward supporting the life insurance, mutual fund, loan and living benefits segments.
Desjardins' Chief Executive Monique Leroux said the company, for now, is not scouting for other deals and its priority would be on organic growth and integrating the State Farm assets.
"This is a transaction that is very important for Desjardins in terms of increasing our footprint across the country," Leroux said in an interview. "This acquisition will allow Desjardins to develop a broader, multi-channel distribution network."
Once the deal closes, State Farm's 1,700 Canadian employees and its network of more than 500 Canadian agents will continue to serve more than 1.2 million customers in Ontario, Alberta and New Brunswick, the companies said in a joint statement.
Barclays (BARC.L) was financial adviser to State Farm, and Skadden, Arps, Slate, Meagher & Flom LLP and Gowling Lafleur Henderson LLP were legal advisers.
For Desjardins Group, Desjardins Securities and BNP Paribas (BNPP.PA) were financial advisers, and McCarthy Tetrault LLP and Mayer Brown LLP acted as legal advisers.
($1 = 1.0939 Canadian dollars)
(Reporting by Euan Rocha; Editing by Lisa Von Ahn)
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