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 Tokio Marine, Japan's largest insurer by market value, expects to
complete its biggest-ever acquisition between October and December,
it said in a statement.
With insurers among the most acquisitive Japanese companies, Tokio
Marine alone has spent more than $8 billion on international deals
since 2008, including U.S. insurers Philadelphia Consolidated for
$4.7 billion in 2008 and Delphi Financial for $2.7 billion in 2012.
Driven by a need to diversify geographical exposure to natural
disasters, Tokio Marine President Tsuyoshi Nagano told Reuters
earlier this month that his firm was still scouring markets around
the world for acquisitions. He added, however, that rising prices
had made it more cautious in the Asia-Pacific region.
Tokio Marine on Wednesday said buying HCC will boost the proportion
of overseas profit to 46 percent of its total, from 38 percent
projected for the current financial year.
Japan's outbound M&As hit an annual record of $83.2 billion in 2012,
but deal volumes have since dropped in part due to a decline in the
yen, Thomson Reuters data showed.
Before Tokio Marine's announcement, Japan's outbound M&As stood at
$38.5 billion so far this year, up 15 percent on the same period
last year. The biggest deal had been Japan Post Holdings Co Ltd's
[IPO-JAPP.T] A$6.5 billion ($5 billion) acquisition of Australian
freight and logistics firm Toll Holdings Ltd.
The Bank of Japan's easy-money stimulus policies have spurred record
profit at Japanese companies, but sluggish business demand at home
has prompted them to look abroad for growth, especially to the
United States, even though the weaker yen makes such acquisitions
more expensive.
HIGH PRICE FOR GOOD DEAL
Tokio Marine said it would pay $78 a share, or 1.9 times HCC's book
value as of March 31, representing a 35.8 percent premium to the
U.S. company's average share price over the past month.
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"The price is high, but U.S. financial companies' share prices are
already traded at a premium and on top of which, we have to pay
premium for acquiring control of the company," Nagano told a news
conference. "We have to pay money, otherwise, we cannot find a good
partner."
HCC, based in Houston, Texas, has 2500 employees and had $458
million in net profit on revenue of $2.7 billion in 2014.
Nagano said Tokio Marine will not issue new shares to fund the
acquisition, and that it would use cash on hand and secure debt
instead.
The insurer said it would be able to greatly diversify its business
portfolio through HCC, which runs a bevy of specialty lines of
insurance, including accident and health, and directors' and
officers' liability.
Credit Suisse and Evercore acted as financial advisers to Tokio
Marine, while Goldman Sachs advised HCC, the U.S. company said in a
separate statement.
(Editing by Will Waterman and Christopher Cushing)
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