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June 08, 2008 at 04:00 PM
MetLife Inc. said last week that it plans to divest its 52% share of Reinsurance Group of America Inc.
MetLife, New York, would trade its stake in RGA, St. Louis, for its own stock.
RGA, a global provider of life reinsurance, has about $2.2 trillion of life reinsurance in force.
Under the planned deal, RGA would recapitalize its common stock into Class A and Class B shares. MetLife would take RGA Class B common stock in exchange for its existing RGA stock, then trade those shares for its own common stock.
Andrew Kligerman, an analyst for UBS Investment Services, New York, says the structuring of the split-off of RGA would contain significant tax advantages for MetLife. The transaction would “mimic a tax-free share repurchase,” he notes. “Instead of financing buybacks by selling RGA and incurring taxes on the proceeds, Met will allow its shareholders to tender Met shares in exchange for RGA shares (at a discount, in essence, passing on some of the tax savings).”
Kligerman said he understood the split-off had been in the works for the past 15 to 18 months and was not the result of any specific event.
According to a joint statement from MetLife and RGA, the deal should give both companies increased flexibility and ease the way for growing their “core businesses.”
RGA has a market capitalization of about $3.2 billion, which would appear to give the proposed stock swap a value of about $1.6 billion.
