NN Group offers €2.4bn for rival Delta Lloyd

Dutch NN Group intends to make an all-cash offer for all issued and outstanding ordinary shares of Delta Lloyd, valuing the Dutch competitor at €2.4 billion, a premium of approximately 53% over the last three-months average closing price of the stock.

The deal would create “a well-diversified leader in the Dutch pensions, life & non-life insurance and banking sectors, with a strong asset management platform, attractive international presence, ample growth opportunities and appealing customer propositions,” according to NN Group.

An increase of scale and efficiency resulting from a deal would significantly drive expected earnings per share and free cash flow, according to a press release. NN Group wants to finance the acquisition through existing cash resources and external debt.

Lard Friese, CEO of NN Group, said: “Since our IPO [initial public offering] in 2014, we have been focused on the execution of our strategy, delivering an excellent customer experience and pursuing growth in selected European markets and Japan. Our financial position is robust, allowing us to focus on further improving our businesses and delivering value to our shareholders.

“We believe there is a clear and compelling logic to bring consolidation to the Dutch insurance market through a combination of the businesses of NN Group and Delta Lloyd in a way that benefits both companies and their stakeholders.

“The combination will be a leading player in the Dutch insurance, banking and asset management markets, with a strong international presence, which will benefit from economies of scale and significant free cash flow generation potential, and offer an array of attractive products and services to customers.”

Delta Lloyd said on October 5 that it notified NN Group on October 3 that it would consider its proposal and would revert with its response without delay.

Commenting on the potential deal, CreditSights analysts questioned the attractiveness of the deal for Delta Lloyd shareholders. While the offer includes a premium on the share value, it is based on an already low stock valuation.

M&A activity was anticipated in the Netherlands because of the fragmentation of the insurance market, where there are too many mid-sized players for a relatively small market, according to CreditSights.

“While the regulator is likely to support the takeover as it would remove a heavy weight from its shoulders, the takeover road is likely to be bumpy, in particular considering the expected reactions from some of Delta Lloyd's shareholders,” according to CreditSights.