Competition and Solvency II drive NN Group-Delta Lloyd to €2.5bn merger

NN Group and Delta Lloyd have reached a conditional agreement under which NN Group will buy Delta Lloyd for €5.4 per share which equates to €2.5 billion. The companies said the deal has been driven by competitive market conditions and the capital requirements of Solvency II.

The two companies had been in talks for some time, both open to the possibility of a deal due to the  cost synergies it would offer. However, Delta Lloyd had  rejected an earlier offer by NN Group in October this year.

The purchase price represents a 55 percent premium over the three-month average closing price of Delta Lloyd prior to the initial announcement on 5 October 2016.

The companies said that a combination of Delta Lloyd and the Dutch and Belgian activities of NN will create a stronger platform within the Benelux region from which the companies can grow and also capture cost synergies, offering shareholders higher returns over time.

Hans van der Noordaa, CEO of Delta Lloyd, said: “Delta Lloyd is a highly client focused organisation with excellent market positions. I am proud of how the management and employees of Delta Lloyd have worked together over the last years to improve the operations and capital of the Group.

“We have been making good progress towards our goals. But our boards have recognised the risks to the achievement of those goals which exist particularly in respect of the ongoing evolution of Solvency II capital requirements and a competitive market, that is on the verge of consolidation.

“After extensive analysis of different alternatives, we made a clear decision that a combination of NN Group and Delta Lloyd is in the long term interest of our stakeholders including our shareholders. The offer provides a certain cash premium for shareholders and also a secure future for policyholders.”

Lard Friese, CEO of NN Group, said: “Today's announcement is a significant step in our journey to build a sustainable, profitable business for the future, and to strengthen our leading position in the Netherlands and Belgium. I value the entrepreneurial spirit, customer focus, the commercial agility, and strong distribution capabilities of Delta Lloyd. Customers of both companies will benefit from an enhanced proposition by complementing our product offering and distribution.

“Consolidation in the insurance sector will bring additional stability in our markets, and will generate a materially higher cash return to our shareholders over time, through the benefits of scale. We strongly believe this transaction to be in the best interest of both companies' stakeholders, and I am pleased the transaction has the support and recommendation of the Delta Lloyd Boards.”