Dai-ichi Life Insurance said Wednesday it will buy U.S.-based Protective Life for $5.7 billion in a record deal, the latest overseas takeover by a Japanese firm to counter a declining market at home.
The company, one of Japan’s biggest insurers, said it will issue up to ¥250 billion in new Dai-ichi Life stock to help finance the deal, in which it will pay $70 per share of Protective Life.
That price represents a 34 percent premium on Protective Life shares when they closed Friday in New York, before reports of the deal emerged.
Dai-ichi said the purchase of Protective Life, a midsize firm based in Alabama, is aimed at broadening its overseas business beyond Asia by entering the world’s biggest market for insurance sold to consumers.
“As a result of the acquisition, the company’s business composition in terms of premium income, profits and risk exposure will be more diversified globally, encompassing Japan, North America and the Asia-Pacific region,” Dai-ichi said in a statement.
“The group anticipates the acquisition to be a transformative event for (its) aspiration to become a ‘global insurance group representing Asia,’ enabling us to accelerate growth and expand our business further,” it added.
The buyout — which is expected to be completed later this year or early 2015 — will be the largest acquisition of a foreign firm by a Japanese insurer, eclipsing the $4.7 billion takeover of U.S.-based Philadelphia Consolidated by Tokio Marine in 2008.
Last month, Suntory Holdings said it had completed a nearly $16 billion purchase of the firm behind Jim Beam bourbon, creating one of the world’s biggest high-end spirits makers and giving it a foothold in the U.S. liquor market.
That deal — which eclipsed previous foreign acquisitions by Suntory — was the third-biggest overseas takeover by a Japanese firm, after mobile carrier SoftBank’s $21.6 billion buyout of U.S.-based Sprint Nextel last year and Japan Tobacco’s 2007 purchase of Britain’s Gallaher for almost $19 billion.
Dai-ichi’s announcement is the latest in the trend of Japanese companies looking abroad as their home market declines due to a shrinking population.
The strong yen has helped propel the shopping spree as overseas deals are relatively cheap for Japanese companies, although the pace has slowed as the currency has sharply weakened over the past year.
Dai-ichi’s Tokyo-listed shares, dropped about 5.0 percent Monday on dilution concerns following reports of the possible deal.
The firm reported net income of ¥80 billion on revenue of ¥5.3 trillion in the business year that ended in March.