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December 11, 2002 at 07:00 PM
NU Online News Service, Dec. 11, 11:38 a.m. – The rating agencies are giving efforts by Manulife Financial Corp., Toronto, to acquire Canada Life Financial Corp., through an unsolicited takeover mixed reviews.
Manulife, the second largest Canadian life insurer, has offered shareholders of Canada Life, the fourth largest, a combination of cash and stock worth about $4.1 billion in U.S. currency.
Manulife controls the equivalent of $89 billion in assets in U.S. currency, and Canada Life controls $42 billion. Manulife once had more assets than any other Canadian life insurer, but Sun Life Financial Services of Canada Inc., Toronto, recently vaulted over it by acquiring Clarica Life Insurance Company, Waterloo, Ontario. Completing the Canada Life deal should help Manulife regain its position as the biggest Canadian life insurer, Manulife says.
The Canada Life deal would also increase Manulife’s market share in Canada and the rest of North America, and help it expand in the United Kingdom, where Canada Life has a big share of the group life market.
In the 1990s, the rating agencies might have emphasized the value the Canada Life deal could bring to Manulife, but, in these more conservative times, some agencies are emphasizing the risks Manulife faces.
Fitch Ratings Inc., New York, points out that other bidders could emerge, and A.M. Best Company, New York, warns that Manulife could have a tough time learning to do business in countries where it does not already operate.
“Moreover,” the Best analysts write, “as this offer is an unsolicited one, its structure may complicate integration activities given the limited due diligence performed on Canada Life.”
Standard & Poor’s, New York, also warns about the dangers involved with making an unsolicited bid, one being the “significant distraction that this may pose for the company’s senior management.”
But analysts at Moody’s Investors Service, New York, are praising the deal.
