Old Mutual PLC said Friday that it had bid $6.1 billion to buy Skandia AB, the Nordic region's biggest insurer, in order to enter Scandinavia and bolster its U.K. sales.
The deal for the Swedish insurer would be Europe's largest insurance takeover in five years.
London-based Old Mutual said it would pay $7.01 in cash and stock for each Skandia share. The offer is 25% more than Skandia's closing share price on May 12, the day before Old Mutual said it was in talks to buy the company.
Old Mutual chief executive officer Jim Sutcliffe is seeking markets beyond South Africa, where the insurer earns three-quarters of its profit. It said Aug. 29 it was seeking backing from Skandia's board for an offer and expected shareholders of the Stockholm-based insurer to support its bid.
Investors holding 15.6% of Skandia, including Cevian Capital, back its offer, Old Mutual said. Skandia's shares were trading at $6.77 before they were suspended ahead of the announcement.
Mr. Sutcliffe said in February that Old Mutual planned to expand by spending about $1.82 billion to buy U.K. asset managers and life insurance units that are closed to new business. Skandia generates half its revenue in the United Kingdom, Europe's largest pension market.
The deal would be the biggest European insurance takeover since CGU PLC in the United Kingdom bought Norwich Union PLC for about $11.8 billion to form Aviva PLC in 2000, according to data compiled by Bloomberg News.
Skandia's market value through May 12 had dropped 83% from a peak of $29 billion in June 2000 after its U.S. annuity-sales strategy, mostly linked to high-growth stocks, backfired with the slump in telecommunications and Internet shares.
In January 2004, Skandia changed CEOs amid criticism over bonuses paid to executives. The company had to reserve $81.6 million in the second quarter of this year for American Skandia, a former business (sold to Prudential Financial Inc. of Newark, N.J.) that is among companies being investigated by the Securities and Exchange Commission for possibly improper trading of mutual fund shares.
Skandia posted a second-quarter net loss of $236 million as it wrote down the value of a U.K. personal investment unit and set aside money to cover a U.S. settlement.
Skandia would be Old Mutual's biggest purchase. The insurer, founded in Cape Town in 1845, sold shares to the public in July 1999 when it converted into a publicly traded company from one owned by its customers.
