Swiss Life advanced a sweeping restructuring on Monday, unveiling plans to buy German investment adviser AWD in an agreed deal valuing AWD at 1.16 billion euros ($1.71 billion).
The deal will give Swiss Life -- its coffers bursting with cash from the recent sales of non-core business units -- access to growth markets in central and eastern Europe and give AWD a long-term strategic partner.
But Swiss Life shareholders met the deal with caution, pushing its shares lower -- in sharp contrast to AWD, whose shares bolted higher. Swiss Life plunged as much as 5.6 percent to 300.25 francs, with AWD rocketing 30 percent to 29.80 euros.
"It's definitely not a cheap deal for them," said analyst Birgit Roper at Societe Generale.
"The core argument of AWD was, in contrast to any other life insurance company, that they said they were independent. They are eroding their value proposition," she said.
"Swiss Life has bought a good sales team but the reputation that AWD has as an independent service provider is going to suffer a bit," said analyst Stefan Wolf at WestLB.
On Nov 26, Swiss Life unveiled a management reshuffle in the wake of a sweeping restructuring program, with speculation intensifying it could join a round of consolidation in the insurance sector.
Since Nov 7, Swiss Life has sold its lackluster Banca Del Gottardo unit to Italian rival Generali, its Dutch and Belgian units to SNS Reaal and announced a 2.5 billion-franc ($2.27-billion) share buyback.
It has said it is seeking add-on acquisitions in its core markets and is expected to unveil more aggressive growth targets at an investor day on Dec. 4.
The restructuring had been welcomed by investors, who have driven the company's shares 7 percent higher so far this year, partly on speculation the group is positioning itself to either buy or be bought.
Swiss Life will offer AWD shareholders 30 euros per share in January, a premium of 36 percent over the weighted average share price over the past three months of 22.06 euros, AWD said in a statement.
Swiss Life said it would generate 50 million Swiss francs annually in synergy benefits through 2012 from the deal, with savings split equally between Germany and Switzerland. Half would be cost and half revenue synergies, Rolf Doerig, Swiss Life CEO, said in a conference call with journalists.
AWD said its management board and the family of AWD's founder, Carsten Maschmeyer, supported the offer and that Maschmeyer would remain chief executive for another five years.
The family had committed to accept the offer in respect of 20 percent of AWD's equity capital but would keep a 10 percent interest. Swiss Life already holds 2.68 percent of AWD's shares as well as options to acquire another 2.75 percent.
The transaction was expected to have a positive impact on Swiss Life's earnings per share by 2009 at the latest, AWD said.
AWD added that it would retain its business model of providing independent financial advice with an open product platform.