By Euan Rocha
TORONTO Jan 15 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, 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
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
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 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
were financial advisers, and McCarthy Tetrault LLP and
Mayer Brown LLP acted as legal advisers.