Prudential Plc (PRU), the U.K.’s biggest insurer by market value, will buy the life insurance business of Thanachart Bank Pcl, which is part-owned by Canada’s Bank of Nova Scotia (BNS), for as much as 368 million pounds ($590 million).
Prudential will pay Bangkok-based Thanachart 358 million pounds in cash when the transaction is completed and a further 10 million pounds 12 months later, the London-based insurer said in a statement through the Singapore stock exchange. The transaction is subject to regulatory approval and is expected to close in the first quarter of 2013, the company said.
Prudential Life Assurance (Thailand) Pcl, a unit of the U.K. insurer, will also establish an exclusive 15-year partnership with Thanachart Bank, the London-based company said in the statement. The joint venture will develop the group’s so- called bancassurance business, which is focused on distributing insurance products via banks.
“This transaction builds on Prudential’s strategy of focusing on the highly attractive markets of Southeast Asia,” the group said in the statement. “Life insurance penetration in Thailand remains low at only 2.7 percent, providing substantial long-term profitable growth opportunities.”
The acquisition of Thanachart Life, which is among the top 10 insurers by gross premiums in Thailand, will double Prudential’s market share in the country, it said. The insurance company had profit after tax of 1.23 billion baht ($40 million) in the 12 months ended June 30, according to the statement.
Thanachart Capital Pcl (TCAP), the parent of privately-held Thanachart Bank, rose as much as 6 percent to 39.75 baht in Bangkok, the biggest intraday gain in four weeks. The stock was at 38.50 baht as of 11:08 a.m. local time.
“Thanachart will make a substantial profit from this transaction,” Tanadech Rungsrithananon, an analyst at Krungsri Securities Co. in Bangkok, said by phone today. “The partnership with a global brand like Prudential will enable Thanachart to sell more insurance products through its branch network.”
Thanachart Capital, which owns 51 percent of the banking unit, may book a gain of at least 7 billion baht from the transaction in the first quarter of 2013, according to Tanadech, who has a trading buy rating on the stock with a share-price estimate of 44.50 baht
Thanachart Bank, Thailand’s fifth biggest, has more than 4 million customers and 630 branches, according to Prudential.
Prudential’s shares have rallied 34 percent this year as it avoided the European sovereign debt crisis by focusing on selling life insurance to Asia’s growing middle classes and pension products to baby boomers in the U.S. The insurer, which gets 80 percent of its revenue from outside the U.K., is midway through a plan to double profit in Asia from 2009 levels.
Thanachart was advised by Citigroup Inc. (C) and Thanachart Securities Pcl, while Prudential was advised by Morgan Stanley (MS), two people with knowledge of the matter said, asking not to be identified as the information is private.