Aflac Inc. confirmed that Japan Post Holdings Co. Ltd. will purchase approximately 7% of its outstanding common shares through a trust.
Aflac said the minority investment will not be dilutive to its existing shareholders, because Japan Post will acquire its stake through open market or private block purchases in the U.S. In addition, this agreement does not change Aflac's expectation of repurchasing $1.3 billion to $1.7 billion of its common shares in 2019.
The companies said the investment reinforces their commitment to the cancer insurance marketplace in Japan and that JAPAN POST Co. Ltd. will continue to offer Aflac's cancer products through more than 20,000 postal outlets, and through Japan Post Insurance Co. Ltd. and its 76 directly managed sales offices.
The companies will pursue further collaboration opportunities in areas including product development, digital technology, business expansion in Japan and abroad and through Aflac Global Investments' asset management capabilities.
Under a shareholder agreement, the Aflac shares will be acquired by a trust with Japan Post Holdings as the economic beneficiary. Reports about the potential tie-up had indicated that such a structure would be used to ensure compliance with U.S. rules on foreign government ownership of insurers; Japan Post is publicly listed but remains majority state-owned.
Japan Post Holdings will not have a board seat on Aflac's board and will not have rights to control, manage or intervene in its management. The agreement also includes a 10% stake cap, a minimum holding period and a standstill provision and voting rights restrictions.
Once held for 48 months, Aflac shares convey 10-for-1 voting rights, and the restrictions limit the rights of the trust to 20% of the total voting rights and also apply restrictions in respect of certain change of control transactions.
The deal is subject to certain regulatory approvals in Japan and the U.S., which are anticipated in the second half of 2019.
Eversheds Sutherland (US) LLP served as regulatory counsel to Aflac, with Cynthia Shoss, John Pruitt and Daren Moreira working on the transaction. Skadden Arps Slate Meagher & Flom LLP acted as deal counsel, with Mike Rogan and Rick Oliver working on the transaction.