Suncorp to acquire Promina

Suncorp-Metway and Promina Group have confirmed they have entered into a merger implementation agreement that will see Suncorp purchase the whole of Promina for a price of $7.9 billion.

The details of the agreement have not changed since Promina recently announced it had received an offer for its acquisition by Suncorp, and will see the Queensland-based Suncorp issue 0.2618 of its shares plus $1.80 cash for each Promina share.

The cash component of the deal will comprise $1.9 billion in excess capital, with the remainder to come from non-dilutionary pro-rata equity entitlements issued to Suncorp shareholders.

The transaction will make the combined group the tenth largest ASX-100 company, with assets totalling $63 billion, as well as the second-largest general insurer in Australia and New Zealand.

Suncorp chief executive John Mulcahy will lead the combined entity, with Promina chief executive Mike Wilkins taking on a consultative role for the next six months.

The board of the new group is to be extended to encompass four members of the current Promina board and will include Leo Tutt. Incumbent Suncorp chairman of the board John Story will chair the new expanded board of directors.

The integration of the two businesses is expected to generate net synergies before tax of $225 million per year, with three-quarters of these efficiencies to be realised within the first two years of the combined group’s operation.

“If approved, this transaction will create the leading customer focused diversified financial services provider operating in Australia and New Zealand, and builds on the foundation of two successful and well-managed businesses that share a common commitment to following a customer led strategy,” Suncorp chief executive John Mulcahy said.

The agreement is subject to approval by Promina shareholders, who will vote on the issue in February 2007. If approval is granted, the transaction is expected to be completed in April next year.