Manulife, Hancock form $26bn giant

CANADA'S Manulife is to merge with John Hancock Financial Services in a stock-swap deal worth $10.8bn (£6.5bn), creating a $25.6bn company - the second largest life insurer in North America and the fifth largest in the world.

Manulife's chief executive Dominic d'Alessandro will be president and chief executive of the new company, which will be based in Toronto.

'We see this as a unique strategic opportunity to combine two exceptionally strong companies into a single, integrated, global market leader whose scale and capital base will drive even greater growth and shareholder value,' d'Alessandro said. 'The benefits of this transaction are many, strengthening our position in each of our core businesses.'

Hancock chief executive David d'Alessandro (no relation) said consolidation in the industry was inevitable.

'For companies of our size to compete and grow in the future, it is necessary,' he said in a statement.

Hancock's d'Alessandro will become chief operating officer in the unified operation.

The combined company will generate net profits of about $1.4bn with some $246bn in assets under management. Under the deal, Hancock shareholders will receive 1.1853 Manulife shares for each John Hancock share, pegging them at $37.60, an 18.5% premium to Friday's share price.

According to Manulife, the deal will lead to cost savings of $255m after three years.

While that will inevitably mean job losses, Manulife refused to be drawn on the issue.

'They will be looking at them as part of the integration and I hope that the majority of jobs will be taken care of through normal attrition and through normal business growth,' a spokeswoman said.

The deal has been rumoured for some time, with speculation reaching a crescendo on Friday which saw heavy trading in both companies' shares. Manulife, once Canada's largest, has been sidelined in recent years by consolidation in the insurance industry in the country and this deal leapfrogs it ahead of its competitors and back to the number one slot.

The company has been looking for acquisitions or mergers for some time, both at home and in the US.

It was reportedly in merger talks with Canadian Imperial Bank of Commerce last year, but talks fell apart when it became obvious the regulatory hurdles were too great.

John Hancock, recently rumoured to be up for sale, was demutualised and started to trade publicly in 2000.