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Tryg to acquire Danish P&C insurer Alka

Tryg A/S agreed to acquire Denmark-based property and casualty insurance business Alka Forsikring for a total consideration of 8.2 billion Danish kroner ($1.31 billion).

The total deal value includes excess capital of 2.5 billion kroner, valuing Alka's operations at 5.7 billion kroner, Tryg said Dec. 4. The transaction, which is subject to standard regulatory approvals, is expected to complete in the first half of 2018.

Tryg said it will finance the transaction by issuing up to 10% of its outstanding shares in a fully underwritten equity placement through an accelerated book-building, raising nearly 4 billion kroner, and by issuing a Tier 1 bond of about 500 million kroner in 2018. Tryg's majority owner, TryghedsGruppen smba, will subscribe for 60% of the placement shares at the book-build price and has also committed to underwrite all shares at 146 kroner per share.

Tryg has 274,544,000 shares outstanding as of Sept. 30, according to S&P Global Market Intelligence data. Its stock price closed at 151.50 kroner Dec. 1.

The company noted that it expects to generate merger benefits in the combined entity of 300 million kroner by 2021, with an estimated impact of 75 million kroner and 150 million kroner in 2019 and 2020, respectively. It also expects to incur a total of charge of 250 million kroner by 2018, due to one-off transaction costs and a restructuring provision.

Alka, which is owned by Danish unions, companies affiliated with the unions, Folksam and employees, has about 380,000 customers and gross premiums of 2.5 billion kroner.