ZURICH Swiss Life SLHN.VX is selling its Dutch and Belgian units to SNS Reaal SR.AS, enabling it to return 2.5 billion Swiss francs ($2.23 billion) to shareholders as it seeks more ambitious growth targets.
Swiss Life shares rose 3 percent to 295.25 Swiss francs as investors welcomed the sale price and buyback news. SNS Reaal shares were down 1.2 percent at 15.35 euros.
"This is great -- a share buyback of about one quarter of all shares. And the sale price for the Belgian and Dutch units is very high," said one Zurich trader.
The sale was for a total of up to 1.535 billion euros ($2.24 billion), the life insurer said, consisting of an initial tranche of 1.445 billion euros and up to 90 million euros based on the value of the units in 2007.
"Swiss Life believes it would not have been possible for it to achieve a sustainable profitable market position on a standalone basis ... given the limited scope for consolidation opportunities," the company said.
Swiss Life said it planned to launch a 2.5 billion franc share buy-back over the next 18 months.
Dutch bank SNS Reaal has been on an acquisition spree after listing last year, completing the purchase of the Dutch insurance business of AXA (AXAF.PA) in September after three earlier smaller acquisitions.
The sale comes just after Swiss Life said it would sell its Banca del Gottardo private banking unit to Italian rival Generali (GASI.MI) on November 7, for 1.8 billion francs.
Swiss Life said it expected a 1.2 billion franc windfall from the sale of the Dutch and Belgian units after tax, of which it would book roughly 200 million francs this year and the rest in 2008.
Swiss Life said in October it was considering the sale of the units, which would enable it to make investments in faster-growing markets.
SNS Reaal will finance the deal by issuing 600 million euros in special shares to its controlling foundation, which holds 54.3 percent of SNS Reaal's shares, Chief Financial Officer Ronald Latenstein van Voorst told reporters.
The remainder, about 900 million euros, will be financed by a mix of internal funds and external debt, and Latenstein van Voorst said SNS would take time to determine how much debt it would issue due to ongoing turmoil on the credit markets.
The acquisition will contribute to SNS Reaal's earnings per share within 12 months of completion, which is expected in the second quarter of 2008, SNS Reaal said.
SNS Reaal's Chief Executive Sjoerd van Keulen said the acquisition would contribute to SNS Reaal's growth strategy as it expected to benefit from Swiss Life's Dutch brand name, Zwitserleven, and growing demand for pension products due to less government services.
Goldman Sachs (GS.N) was the exclusive financial adviser to Swiss Life, the group said. The sale was still subject to regulatory approval.
The sale price equates to 1.1 times the traditional embedded value of the businesses as of June 30, Swiss Life said, higher than earlier estimates which had ranged between $1.0 billion and $1.4 billion.
Swiss Life, which has a market capitalization of around $9 billion, is expected to unveil more aggressive growth targets at an investor day on December 4.
(Additional reporting by Gilbert Kreijger in Amsterdam; Editing by Quentin Bryar and David Cowell)