MMC Contrarian Limited (MMA ) has signed agreements to acquire Bupa Australia’s Life Insurance business (MBF Life) and Wealth Management business (ClearView Retirement Solutions) for $195 million. As part of the transaction, MMC has entered into an exclusive alliance with Bupa Australia to market its life insurance and wealth management products to Bupa Australia’s 2.9 million private health insurance customers for a period of 10 years. MMC’s acquisition of MBF Life and ClearView, together with associated costs, will be fully funded through existing cash resources of MMC of $69.2 million; a fully underwritten institutional placement conducted on Thursday 25 March 2010 to raise $61.7 million which is conditional on shareholder approval at a meeting on 30 April 2010 ; and a fully underwritten non-renounceable pro-rata entitlement offer to raise A$73.3 million.
MMC’s newly appointed Managing Director and CEO, Mr Simon Swanson, said: “The acquisition of Bupa Australia’s Australian life insurance and wealth management businesses represents a major opportunity to transform MMC into a significant, independent wealth management company in the Australian market place. The exclusive alliance with Bupa Australia represents a key growth platform for the medium term. We are delighted to be partnering with an organisation of Bupa’s capabilities and look forward to delivering financial products and services to Bupa’s customers”. The acquisition provides a compelling opportunity to create significant value for MMC shareholders. The acquisition price for MBF Life and ClearView represents an attractive discount of 22.6% to the assessed embedded value of $252 million (inclusive of the value of future franking credits) or an 8.5% discount to the assessed embedded value of $213 million (excluding the value of future franking credits). Synergies from the acquisition are likely to be substantial. The acquired businesses represent an ideal platform from which to grow the combined products and services of MBF Life, ClearView and ComCorp. In addition, MMC estimates that annual cost savings of approximately $6.5 million will be achieved progressively over the first year. MMC will remain debt-free post acquisition and will be in a strong capital position with approximately $36.5 million of surplus capital above regulatory requirements and residual cash of approximately $11.7 million, before settlement of any one-off integration and restructure costs associated with the acquisition.
