Dai-ichi to buy Protective Life for $5.7 billion

Dai-ichi Life Insurance, one of Japan's biggest life insurers, agreed on Tuesday to buy the Protective Life Corporation for about $5.7 billion, as Japanese companies continue to seek growth outside their home country.

Under the terms of the deal, the Japanese insurer will pay $70 a share in cash, nearly 34 per cent above where Protective's shares were trading on Friday, before speculation about a deal began to emerge.

In response to news reports about a potential deal earlier this week, Dai-ichi said in a statement that it was considering buying an American firm, but declined to confirm that it was Protective.

Japanese companies have looked abroad for growth in recent years, as business in their home markets have posted slowing growth. Insurers have been particularly active; nearly three years ago, the casualty insurance provider Tokio Marine agreed to buy Delphi Financial Group of the United States for $2.7 billion.

The 102-year-old Dai-ichi first approached Protective several months ago with an unsolicited offer, according to the American company's chief executive, John D Johns. Although Dai-ichi maintained an office in the US, it did not have significant operations in North America, and sought to make an entrance.

Protective is no stranger to deal-making: it has struck 47 acquisitions over its 97-year history, including the takeover of Mony Life Insurance. It earned $393.5 million last year.

The two sides had met each other a few times over the years, but weren't particularly close, Johns said in an interview. But the Japanese insurer ultimately argued that a combination of the two companies would make significant financial and strategic sense.

The two companies began working on a deal in earnest around March, with Johns flying to Tokyo last week to meet with Dai-ichi staff members.

"We saw this as an opportunity for a win-win deal," he said. "They're a very impressive operation."

Even after the deal, Johns and his entire management team will remain in place, and Protective will continue to be based in Birmingham, Ala.

The deal is expected to close by early next year, pending approval from shareholders and regulators in Japan and the United States.

As part of the merger agreement, Protective has the right to try and find higher bids through what is known as a "market check." Should it decide to break off the deal with Dai-ichi in favor of another suitor, the American insurer would pay a $140 million breakup fee.

Dai-ichi was advised by Goldman Sachs and the law firms Baker & McKenzie and Willkie, Farr & Gallagher. Protective was advised by Morgan Stanley and the law firm Debevoise & Plimpton.

©2014 The New York Times News Service