Canada's Manulife buying insurance giant John Hancock in $10.4 billion deal

Monday, September 29th 2003, 12:00 am

By: News On 6

BOSTON (AP) _ Canada-based Manulife Financial Corp. will acquire John Hancock Financial Services Inc. in a $10.4 billion stock swap, obtaining a venerable U.S. financial services firm that has long been a civic and corporate pillar of Boston.

Under terms of the deal, shareholders of Boston-based John Hancock will receive 1.1853 shares of Manulife for each of their shares, or $37.60 per share, based on Hancock's Wednesday closing price.

The deal announced Sunday would create a company ranked fourth in the United States in individual life insurance sales. The combined company would be Canada's largest individual and group life insurer.

Based on Friday's close of $30.20 for Manulife's U.S.-traded shares, the offer is worth about $35.79 for each Hancock share, a 4 percent premium over Hancock's closing price Friday.

John Hancock, which had risen 7 percent on Friday amid published reports it was in advanced talks to be acquired, fell 74 cents to $33.56 in morning trading Monday on the New York Stock Exchange. Manulife's U.S. shares dropped $1.29, or more than 4 percent, at $28.91 on the NYSE.

Manulife CEO Dominic D'Alessandro told analysts on a conference call Monday that the merger would reduce costs about 10 percent, or about $255 million, but he did not expect large numbers of layoffs.

``Combined, we will have all the products and all the distribution channels to be a much stronger company,'' said John Hancock CEO David D'Alessandro _ no relation.

Founded in 1862, John Hancock grew to become a financial giant in Boston, dominating the city's corporate landscape and, eventually, its skyline with the John Hancock Tower, a glass skyscraper that is the city's tallest. The building was sold earlier this year for $910 million; the company now leases the space.

The company, which provides insurance and investment products and services, mostly in North America, went public in 2000. Manulife and its subsidiaries also provide financial products and services, including individual life insurance, group life and health insurance, pension products, annuities and mutual funds.

Company officials expect the merger to close in the second quarter of 2004, pending regulatory and shareholder approval. Toronto-based Manulife also said it will spend as much as $2.2 billion to repurchase its common shares.

The deal will give the new company a market capitalization of $25.6 billion and $1.4 billion in combined net income, based on 2002 figures. The two companies had $246 billion in assets under management as of June 30.

The deal will save $255 million annually by 2007, and add 8 cents per share to Manulife's earnings by 2005, the companies said.

Manulife's Dominic D'Alessandro will be president and CEO of the company, which will have its global headquarters in Toronto. David D'Alessandro will become chief operating officer; a year after the deal is complete, he will become president of Manulife.

David D'Alessandro will remain chairman and chief executive of John Hancock Financial Services and will direct the companies' North American retail and group businesses, which will have headquarters in Boston.

The combined company will market products and services under multiple brands, including John Hancock in the United States and Manulife in both countries.

John Hancock has 3,800 employees in Boston and 7,456 worldwide. Manulife employees 12,580 people worldwide, with 700 employees at its U.S. division in Boston.