France-based Axa will acquire XL Group Ltd., a global property and casualty commercial lines insurer and reinsurer, for a total cash consideration of $15.3 billion.
Under the terms of the transaction, shareholders of XL Group will receive $57.60 per share in the Bermuda-based insurer, representing a premium of 33% to the company's March 2 closing share price. Axa expects to finance the acquisition with about €3.5 billion of cash at hand €6.0 billion from the planned IPO of its U.S. operations and related transactions, and about €3.0 billion in subordinated debt. Approximately €9 billion of backup bridge financing is already in place, the two companies said March 5.
Axa shares closed down 9.7% in March 5 trading, ending the day at €22.62 apiece. As of just before midday in New York, XL was up more than 29% at $55.90.
The French insurer said the deal has prompted it to review its exit strategy from its existing U.S. operations, which Axa said it now expects to accelerate. Along with the planned U.S. operations IPO
Subject to approval by XL Group shareholders and regulatory approvals, the deal is expected to take place during the second half. Axa expects its Solvency II ratio to be in the range of 190% and 200% at 2018-end, with the impact of the acquisition expected to be mitigated by operating return and the planned IPO of its U.S. operations.
Following completion of the deal, Greg Hendrick, currently president and COO of XL Group, will become CEO of the combined operations of XL Group, Axa Corporate Solutions and Axa Art. He will also join Axa's management committee, reporting to Axa CEO Thomas Buberl.
XL Group CEO Mike McGavick will become vice chairman of the combined P&C commercial lines operations and will serve as special adviser to Buberl on integration-related and other strategic matters.
XL said in a regulatory filing that the merger agreement contains provisions relating to a potential termination of the deal. These provide that should XL terminate the deal to enter into another merger agreement, or should Axa terminate the deal because XL's board recommendation changes, then XL will pay Axa a termination fee of $499 million, or $249.5 million under certain limited circumstances.
