French insurance giant AXA has agreed to acquire Bermudian (re)insurer XL Group in a $15.3bn deal as it looks to shift its balance of business from life and savings (L&S) to property and casualty (P&C).
The transaction values XL at $57.60 a share, representing a 33 percent premium to the company’s closing share price on 2 March and 1.51x XL's fully diluted book value per common share of $38.04 as of 31 December 2017.
AXA said the deal would make it a leading global P&C commercial lines player across all lines, with combined gross written premiums of EUR30.2bn based on 2016 figures.
Following deal completion, the combined operations of XL Group, AXA Corporate Solutions, and AXA Art will be led by incumbent president and COO of XL Group Greg Hendrick who will assume the role of CEO of the combined entity and will join AXA Group’s management committee. Hendrick will report to AXA CEO Thomas Buberl.
In addition, XL Group CEO Mike McGavick will become vice chairman of the combined P&C commercial lines operations and also act as a special advisor to Buberl.
AXA said that the firm will now “accelerate” the exit strategy of its existing US operations through a planned H1 2017 IPO that will make the group “less sensitive to financial markets”.
It said that the deal will be financed by c.EUR3.5bn of cash in hand, c.EUR6.0bn from the planned US IPO and related transactions, c.EUR3.0bn of subordinated debt, while EUR9bn of backup bridge financing is already in place.
Buberl said the agreed transaction was a leap in its strategy: “This transaction is a unique strategic opportunity for AXA to shift its business profile from predominantly L&S business to predominantly P&C business, and will enable the Group to become the #1 global P&C Commercial lines insurer based on gross written premiums”,
“The future AXA will see its profile significantly rebalanced towards insurance risks and away from financial risks.”
Meanwhile, McGavick remarked: “Today marks an unrivalled opportunity to accelerate our strategy with a new strength and dimension.
“We are excited at the opportunity to build the scale, geographical footprint, product portfolio, and the unmatched commitment to innovation that relevance in the global insurance industry requires. In AXA we have found like-minded partners committed to the absolute necessity to innovate and move this industry forward,” he added.
The deal is expected to close in the second half of the year, subject to XL shareholder and regulatory approval.