The Dutch insurance giant Aegon NV said Thursday that it will acquire Transamerica Corp. of San Francisco for about $9.7 billion in cash and stock.
The deal would make Aegon the third-largest life insurance company in the United States.
The acquisition would also make Aegon the fourth-largest provider of annuities through banks, according to statistics from Kenneth Kehrer Associates of Princeton, N.J.
Transamerica's corporate insurance operations would merge with Aegon's U.S. subsidiary, Aegon USA Inc. of Baltimore, upon closing of the deal, which is expected in the summer. The company's headquarters would be in San Francisco, and its financial markets division would remain in Cedar Rapids, Iowa.
Nikolai Fiskin, an analyst at Stephens Inc. in Little Rock, said the price was fair and that the acquisition would build Aegon's presence in the specialty markets it has pursued.
Aegon would assume responsibility for Transamerica's $1.1 billion of holding company debt. Aegon expects the combined companies to realize an expense reduction of $150 million within three years.
Aegon said, however, that there would be little overlap of operations, though both companies are major suppliers of life insurance and pensions. The company said that Transamerica's Canadian operations and its U.S. general agency distribution channel, which focuses on high-net-worth customers, will add depth to its existing distribution.
The acquisition would bolster Aegon's position as a seller of annuities through U.S. banks.
In 1998 Aegon was the sixth-largest seller of annuities through banks, with $705 million. That figure was down about 35% from the previous year, when it placed third. The slip stemmed from overreliance on a regional distribution system, even as banks looked for direct distribution, Mr. Kehrer said.
"They were slow to react," Mr. Kehrer said.
Transamerica will probably give Aegon a boost in the arm in the bank channel. Transamerica placed seventh in annuities sales through banks in 1998, with sales nearly doubling, to $657 million. Mr. Kehrer said Transamerica accomplished this by maintaining strong, deep relationships with larger banks such as First Union and Chase Manhattan Corp.
"By being in a few of these big banks they have tremendous market share capacity," he said.