No merger mania for Manulife-Canada Life proposal in Talvest Town Hall

(December 13, 2002) Financial advisors were quick to comment in Advisor.ca’s chat forum this week about Manulife Financial’s plan to acquire Canada Life Financial. And some advisors expressed their reservations about the proposal.

On December 9, Manulife bid more than $6.4 billion to acquire Canada Life in an unsolicited — some would call hostile — takeover offer. The proposed merger was announced less than a year after Sun Life closed the deal to buy Clarica. With this deal, Manulife would replace Sun Life as the country’s largest insurer.

Canada Life did not welcome Manulife’s offer with open arms.

“In my view, this proposal does not reflect the value of our company,” said Canada Life chair David Nield, in a statement. “We and our professional advisors are reviewing our strategic options.”

Advisors expressed certain reservations about this possible transaction on the Talvest Town Hall.

“I don’t feel this will benefit consumers or agents. It reduces the competition level and leaves all with fewer choices by way of products and prices,” wrote an advisor identified as Alda in the “Insurance” forum of the online town hall.

“I wonder what is going to now happen with the agents’ deferred commission income pension? Will the new purchaser of Canada Life honor the arrangement with the old career contracts?” queried Lorne Zalasky. (Click here to comment on the bid.)

Manulife president and chief executive Dominic D’Allesandro says the two companies have similar independent distribution systems and he does not foresee major problems with them working together. “So it’s unlikely any Canada Life producers would be disaffected as a result of our two companies coming together.”

The Canada Life board of directors met today to discuss Manulife’s offer. The board heard reports on the bid from financial and legal advisors, and a special committee. The board maintains that Manulife’s offer “does not reflect the value of the company.” So the company may look for other suitors.

“Canada Life’s board of directors is determined to maximize value for the company’s shareholders and has directed the special committee to bring forward strategic alternatives,” said Nield, in a statement.

Canada Life common shareholders will be offered a choice of either $40 in cash or 1.055 Manulife common shares for each Canada Life common share, subject to certain conditions. Manulife hopes to close the deal by the second quarter of 2003, pending regulatory approval.

Tell us what you think of the Manulife bid for Canada Life? Join the discussion in the “Insurance” forum of the Talvest Town Hall on Advisor.ca.

Filed by Jim MacDonald, Advisor.ca, jmacdonald@advisor.ca.

(12/13/02)

The opinions expressed in the online messages posted to any of the forums of the Talvest Town Hall are strictly those of the participants and do not necessarily reflect the views and opinions of the staff of Talvest Fund Management, Advisor.ca or Rogers Media. Material contained in the Talvest Town Hall forums is for information purposes only.