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Phoenix Group to acquire Deutsche Bank's Abbey Life biz

Deutsche BankAG agreed to sell its U.K.-based Abbey Life business to  unitPhoenix Life HoldingsLtd. for £935 million in cash.

The business, which is held within Deutsche AssetManagement, comprises Abbey LifeAssurance Co. Ltd., Abbey Life Trustee Services Ltd. and Abbey LifeTrust Securities Ltd.

In a Sept. 28 statement, Deutsche Bank said the sale willhave a net positive capital impact upon closing and, on a pro-forma basis,would help boost its common equity Tier 1 capital ratio as of June 30 byapproximately 10 basis points.

The transaction, however, will result in an expected pretaxloss of approximately €800 million, primarily resulting from impairment ofgoodwill and intangible assets.

Phoenix Group said the same day that it will raise a totalof £735 million via a fully underwritten rights issue and £250 millionfrom a new bank facility to finance the acquisition. The rights issue will bemade on the basis of 7 rights issue shares issued at 508 pence apiece for every12 existing Phoenix Group shares.

The entire amount of the rights issue has been fullyunderwritten by HSBC Bank Plc; Morgan Stanley & Co. International plc; J.P.Morgan Securities Plc, which conducts its U.K. investment banking activities asJ.P. Morgan Cazenove; Commerzbank Aktiengesellschaft, London branch;and Natixis.

The group expects the acquisition to add £10 billion of AUMand approximately 735,000 policyholders, and to generate approximately £500million of aggregate cashflows between 2016 and 2020 and approximately £1.1billion in aggregate from 2021 onwards.

Phoenix Group said the deal will also support a proposeddividend increase in respect of 2017 to £197 million, representing a further 5%increase in dividend per share in addition to the 5% increase in dividend pershare as a result of its recent AXA deal, and equivalent to a total increase in the dividendper share of 10% from the 2015 level.

The transaction is subject to regulatory approvals,including that of the U.K. Prudential Regulation Authority. Theacquisition is expected to complete by the end of 2016.