Dai-ichi Life Insurance said Wednesday it would buy US-based Protective Life for $5.7 billion in a record deal, the latest overseas takeover by a Japanese firm to counter a declining market at home.
The company, Japan’s number two insurer, said it would pay $70 per share for the American firm and issue up to 250 billion yen ($2.4 billion) in new stock to help finance the deal.
The price is a 34 percent premium on Protective Life shares when they closed on Friday in New York, before reports of the deal emerged.
Dai-ichi said the purchase of Protective Life, a mid-sized firm based in the southern US state of Alabama, was aimed at broadening its overseas business beyond Asia by entering the world’s biggest market for insurance sold to consumers.
“As a result of the acquisition, the company’s business composition in terms of premium income, profits and risk exposure will be more diversified globally, encompassing Japan, North America and the Asia-Pacific region,” Dai-ichi said in a statement.
“The group anticipates the acquisition to be a transformative event for (its) aspiration to become a ‘global insurance group representing Asia’, enabling us to accelerate growth and expand our business further,” it added.
The buyout — which is expected to be completed later this year or early 2015 — would be the largest acquisition of a foreign firm by a Japanese insurer, eclipsing Tokio Marine’s $4.7-billion takeover of US-based Philadelphia Consolidated in 2008.
Last month Japan’s Suntory Holdings said it had completed a nearly $16 billion purchase of the firm behind Jim Beam bourbon, creating one of the world’s biggest high-end spirits makers and giving it a foothold in the major US liquor market.
That deal — which dwarfed previous Suntory acquisitions — was the third-biggest overseas takeover by a Japanese firm, after mobile carrier SoftBank’s $21.6 billion buyout of US-based Sprint Nextel last year and Japan Tobacco’s 2007 purchase of Britain’s Gallaher for almost $19 billion.
Dai-ichi’s announcement was the latest in a recurring trend for Japanese companies as they see their home market decline due to a shrinking population.
A strong yen in recent years also helped propel the shopping spree as overseas deals were relatively cheaper for Japanese companies, although the pace has slowed as the currency has sharply weakened over the past year.
Dai-ichi’s Tokyo-listed shares, which dropped about 5.0 percent Monday on dilution concerns following reports of a possible deal, rose 3.59 percent to close at 1,499 yen on Wednesday.
The firm, which has about 57,000 employees, reported net income of 80 billion yen on revenue of 5.3 trillion yen in the fiscal year ended in March.