British annuity firms to merge in $1 billion deal

LONDON, August 11 (Reuters) – Britain’s Just Retirement has agreed to buy rival Partnership Assurance for 669 million pounds ($1 billion) in shares, hoping greater scale and a stronger capital position will help it cope with changes that have rocked its industry.

The merger is to be effected by means of a court-sanctioned scheme of arrangement of Partnership Assurance.

Under the terms of the merger, Partnership shareholders will be entitled to receive 0.834 new Just Retirement shares for each Partnership share held.

“Key lead indicators now show early signs of a return to growth in Just Retirement’s and Partnership Assurance’s sales of annuities”, the companies said, with combined quote volume for the pair rising 40 per cent in July this year, compared with two months before.

Just Retirement has split the perceived benefits of merging into two broad buckets: “strategic” and “financial”.

The group outlined a continued focus on developing innovative products and enhancing existing propositions, with the new retirement account set for a second half launch.

In addition, the new insurer will look to spread its wings globally by offering “attractive products in new geographies”.

· Outstanding intellectual property.

The deal values Just Retirement shares at 199p, Partnership shares at 166p, and values the entire issued and to be issued ordinary share capital of Partnership at approximately £668.5m. Overseas expansion will be facilitated through combined worldwide expertise.

Permira and Cinven, the largest shareholders in Just Retirement and Partnership respectively, have given their blessing to the deal. The group also expects to make £40m in yearly savings by combining the businesses, following £60m of integration costs.

The combined business is expected to have to raise around £150mln of new “equity capital” to shore up its finances. The Combined Group will have stronger combined capacity for cash generation, supported by Partnership Assurance’s more developed back book and improved operational efficiencies delivered from the combined operating platform, supporting growth and dividend capacity.