Great-West announces friendly bid for Canada Life

(February 17, 2003) Great-West Lifeco has emerged as Canada Life Financial’s white knight, today announcing a friendly $7.3 billion takeover bid for the Toronto-based insurer. The offer trumps an earlier hostile bid for Canada Life from Manulife Financial.

Great-West says it has agreed to acquire all of Canada Life’s common shares for a combination of cash and Great-West securities, valued at $44.50 per share. Based on Friday’s closing price, the Manulife offer was worth $38.66 per share.

“The bid fully reflects the value of the company,” said Great-West CEO Ray McFeetors at a Toronto news conference this morning. “We view Canada Life as a very attractive potential partner.”

McFeetors says the acquisition allows Great-West to add new distribution channels, similar to the Winnipeg-based firm’s purchase of London Life in 1997.

The combined company will have a market capitalization of around $20 billion, McFeetors says, putting it in the top five of North America’s financial services firms.

Canada Life’s board has unanimously endorsed the Great-West offer and is asking shareholders to do the same, says Canada Life CEO David Nield.

“We believe this transaction maximizes shareholder value,” Nield said today. “We approached Great-West immediately following the offer from Manulife, which we deemed as inadequate, not reflecting the value of our company.”

The purchase process took more than two months from start to finish, Nield added, including a full scan of potential buyers from around the world. “After a thorough due diligence, [Great-West] agreed to emerge as our white knight.”

Nield repeated Canada Life’s recommendation that shareholders reject the Manulife offer, first announced in December 2002. And he said those who had already tendered to Manulife would now be able to withdraw that acceptance.

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The deal includes a break fee of 3.95%, which Nield notes is less than a similar fee in Sun Life’s takeover of Clarica last year. “We regard it as right and appropriate under the circumstances.”

Details of the Great-West offer will be mailed to Canada Life shareholders. The transaction is expected to close in the third quarter of 2003 following regulatory approval.

Great-West Lifeco is part of the Power Financial Group, which also owns Investors Group. To support the Canada Life acquisition, Power Financial has committed $800 million while Investors Group is adding $100 million.

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What do you think of Great-West’s offer for Canada Life? Will Manulife try to trump the bid? Share your thoughts in the “Free For All” forum of the Talvest Town Hall on Advisor.ca.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca

(02/17/03)

Doug Watt