French insurance and investment giant AXA has agreed to acquire 100% of Bermudian insurance and reinsurance firm XL Group Ltd. for $15.3 billion (€12.4bn), to be fully paid in cash.
The transaction is subject to approval by XL Group shareholders and other customary closing conditions, and is expected to close in the second-half of 2018.
The $15.3 billion total transaction value represents a premium of 33% to XL Group closing share price on March 2nd, 2018, and creates a leading international P&C commercial lines player across all business lines.
AXA Chief Executive Officer (CEO), Thomas Buberl, commented: “This transaction is a unique strategic opportunity for AXA to shift its business profile from predominantly L&S business to predominantly P&C business, and will enable the Group to become the #1 global P&C Commercial lines insurer based on gross written premiums. The transaction offers significant long-term value creation for our stakeholders with increased risk diversification, higher cash remittance potential and reinforced growth prospects. The future AXA will see its profile significantly rebalanced towards insurance risks and away from financial risks.
“XL Group has the right geographical footprint, world-class teams with recognized expertise and is renowned for innovative client solutions. Our combined P&C Commercial lines operations, will have a strong position in the large and upper mid- market space, including in specialty lines and reinsurance, and will complement and further enhance AXA’s already strong presence in the SME segment. The two companies share a common culture around people, risk management and innovation, positioning AXA uniquely for the evolving future of the P&C industry.”
Once the deal is finalised, the combined operations of XL Group, AXA Corporate Solutions, and AXA Art will be led by Greg Hendrick, current President and Chief Operating Officer (COO) of XL Group, who will be named CEO of the combined entity and who will join AXA Group’s management committee, reporting to Buberl.
Furthermore, Mike McGavick, current XL Group CEO, will become Vice Chairman of the combined P&C commercial lines operations and also a special advisor to Buberl.
McGavick, commented: “Today marks an unrivalled opportunity to accelerate our strategy with a new strength and dimension. With every confidence in how we have positioned XL Group for the future, it is a substantial testament to AXA’s leadership and commitment to maintaining the XL Group brand and culture that we have come to an alignment. We are excited at the opportunity to build the scale, geographical footprint, product portfolio, and the unmatched commitment to innovation that relevance in the global insurance industry requires. In AXA we have found like-minded partners committed to the absolute necessity to innovate and move this industry forward.”
For AXA the deal is expected to reduce sensitivities to financial markets, lower beta and cost of equity, increase cash remittance potential, and reinforce the group’s overall growth potential.
AXA explains that the deal will be financed by ca. Euro 3.5 billion of cash at hand, ca. Euro 6.0 billion from the planned US IPO and related transactions, ca. Euro 3.0 billion of subordinated debt, while Euro 9 billion of backup bridge financing is already in place.