Cowdery set to pay £2.8bn for AXA UK
RESOLUTION, the insurance buyout vehicle, will ask the London market to suspend its shares this morning as it negotiates a £2.8bn takeover of AXA’s UK life and pensions business.
The group, led by entrepreneur Clive Cowdery, will also give a brief update on talks with the French company. But a Rule 2.5 announcement providing full details of the transaction is not expected until next week as technical discussion are likely to run on into the coming weekend.
On Friday, Resolution confirmed its plan to buy most of AXA’s UK operations, including its protection, annuities and group pensions units, and merge them with Friends Provident. The estimated combined embedded value (EV) of the businesses would be £5.5bn. Cowdery aims to create a group with an EV of £10bn by 2011.
After a month of talks, Resolution and AXA took a break over the weekend in anticipation of a busy week ahead. Resolution’s deal team is being led by in-house experts Jon Hack, a former Lazard banker, and Elizabeth Gilbert, previously with Goldman Sachs. Citigroup is providing some outside advice. AXA is being advised by Credit Suisse.
Once its shares are suspended Resolution will be freed to put the idea to its institutional investors. Garnering their support will be crucial as they will be tapped for up to £2.8bn through a rights issue to fund the deal. Resolution is understood to be in advanced talks with investment banks to orchestrate the cash call, although none has yet been hired.
The news will placate analysts who have lost patience with Resolution’s quest to consolidate the insurance sector. Shares in Cowdery’s vehicle have fallen 32 per cent since the start of the year to 60.3p.
AXA UK plans to focus on its £6bn wealth management arm should the Resolution deal go through.
RESOLUTION chairman Clive Cowdery has been a busy man.
As well as AXA, the insurance tycoon is known to have run the rule over the UK arms of Zurich, Aegon and Legal & General in recent months. As one market source puts it: “Resolution has been talking to everybody.”
He had an inkling AXA would be more open than most to the idea of divesting its British life and pensions business. The French group has been looking for some time to realise value from its “back book”, a long tail of legacy policies where contracts of insurance have been agreed but no terms or policy have been issued to the customer. AXA has also been open about its desire to plough capital into higher-growth markets such as Asia.
A deal would ease pressure on Cowdery, who already possesses a £160m fortune from the sale of the first incarnation of Resolution to Pearl for £5bn in 2007. The 47-year-old aims to create value for shareholders by buying up life companies and knocking together their back office functions, saving money.
After AXA UK, Resolution needs to make at least one more big purchase before 2011 to meet the timeframe promised to investors.