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Manulife in deal to buy Standard Life Oversea Holdings for $4B in cash

Manulife Financial President and CEO Donald Guloien speaks in Toronto on May 3, 2012. Manulife Financial Corp. says it plans to buy Standard Life Oversea Holdings Ltd, a subsidiary of Standard Life plc, for $4 billion in cash. THE CANADIAN PRESS/Aaron Vincent Elkaim

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Manulife Financial President and CEO Donald Guloien speaks in Toronto on May 3, 2012. Manulife Financial Corp. says it plans to buy Standard Life Oversea Holdings Ltd, a subsidiary of Standard Life plc, for $4 billion in cash. THE CANADIAN PRESS/Aaron Vincent Elkaim

TORONTO - Manulife Financial Corp. (TSX:MFC) is reaching deeper into the Quebec market, buying the Canadian operations of Standard Life for $4 billion in cash.

The insurance company says the move will boost its presence in the province, which it has underserved in the past, though it will also increase its ability to serve customers across the country and elsewhere around the world from a base in Quebec.

The acquisition of Standard Life Oversea Holdings Ltd, a subsidiary of Standard Life plc, is expected to close in the first quarter of next year.

Excluding transition and integration costs the merger should — after the first year — add three cents per share of earnings over the next three years, Manulife president and CEO Donald Guloien said in an conference call late Wednesday.

"We hope to add an executive team that will participate in the decision-making, not only that will affect all activities in Quebec (but) all activities throughout Canada," Guloien said.

"(The transaction) will enhance our ability to increase dividends in the future."

The CEO delivered a notable portion of the prepared remarks to reporters in French on the media call.

Standard Life put its Canadian business up for sale earlier this year, Guloien told reporters.

Standard Life has about 2,000 employees across Canada and $52 billion in assets under management as of June 30. The company has a strong presence in Quebec, mainly in Montreal and Quebec City.

"We understand that it's very important to serve our French-speaking clients, and we will do so from our base in Quebec," Guloien said.

Job losses "might" come from the combination of the two insurance companies, but will be "limited," he added.

"We believe (that) in the full integration, within the next 18 to 24 months, the great majority of jobs in Quebec will be maintained," Guloien said.

"We expect the head count to be higher in Standard Life than it currently is."

Part of the funds for the acquisition will be made through the $2.1 billion raised through the private placement of $500 million of subscription receipts to the Caisse de depot et placement du Quebec and another $1.6 billion through a public bought deal agreement.

Barclay's analyst John Aiken described the deal as being "likely as clean an acquisition as Manulife could do, with little disruption to its capital or leverage ratios."

"Further, we do not believe that this transaction necessarily precludes Manulife from pursuing other opportunities," Aiken wrote in a note, although it will likely take a little while for both the market and Manulife to digest.

". . .What may fly underneath the radar is the longer-term revenue synergies. Standard Life's Canadian products provide additional heft for Manulife's distribution but the enhanced distribution agreement on top of an already successful partnership could prove to be a hidden gem."

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