AXA sells some UK units to Resolution

[June 24, 2010]  LONDON (AP) -- British buyout fund Resolution Ltd. said Thursday that it has agreed to acquire a package of U.K. businesses from French insurer AXA SA in a deal worth 2.75 billion pounds ($4.1 billion).

Resolution says it intends to merge the AXA businesses with another British insurance company, Friends Provident, doubling Resolution's share of the U.K. life and pensions market.

It aims to save 75 million pounds a year in costs within three years by combining the operations.

Resolution is paying 2.25 billion pounds in cash and up to 500 million pounds in deferred compensation. The purchase is financed by a rights issue of 2.05 billion pounds and an acquisition facility of 400 million pounds.

"We believe this is a sensible deal that will further enhance the management's historic track record of buying undervalued assets, restructuring them and selling them on to create value for shareholders," said Jonathan Jackson, head of equities at Killik & Co. in London.

Jackson said the acquisition represents the second step in Resolution's UK Life Project, which targets growing its life and asset management business to 10 billion pounds on an embedded value basis by the middle of next year.

Embedded value, used for evaluating insurance companies, reflects expected future cash flows from sales in the year and updating assumptions based on experience.

The Unite union, representing AXA staff in Britain affected by the deal, said it was worried that employees might lose their current pensions.

"The sale of the AXA life protection business will cause the workforce considerable anxiety as they now have serious concerns about the security of their jobs and the drive by Resolution to reduce costs," said Siobhan Endean, a national officer for Unite.

The deal is subject to approval by Britain's Financial Services Authority and Resolution's shareholders.

"The enlarged group will be well positioned to create value from enhanced cashflow, significant synergies and selected profitable new business growth," said John Tiner, chief executive of Resolution Operations LLP, part of the Resolution Group.

"We see a strong pipeline of potential further consolidation steps which will help complete the company's U.K. Life Project, and we will remain highly disciplined on the selection and pricing of possible transactions," Tiner said.

AXA says the sale includes its traditional life and pensions business in Britain and its annuity business. The French company says it will now focus on growing its wealth management business in Britain.

"As we have shown in the past, we are committed to focus on businesses that benefit from the right combination of scale, competitive position, growth prospects and profitability, as this is the best way to create sustainable value for our clients, our distributors, our staff and our shareholders," said Henri de Castries, chairman and CEO of AXA Group.

"With this transaction, we are selling to Resolution businesses -- notably protection and group pensions -- which will benefit from Resolution's bigger scale in these activities. We will focus on our U.K. wealth management business where we are among the leaders and plan to continue to grow fast."

In April, AXA Private Equity agreed to pay $1.9 billion to Bank of America for a portfolio of private equity, and about $720 million for private equity holdings of the French bank Natixis.

[Associated Press; By ROBERT BARR]

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