(Reuters) – Friends Life Group Ltd said it would sell Lombard, its European wealth advisory arm, to Blackstone Group for an initial consideration of 317 million pounds ($532 million), and use part of the proceeds to buy back shares.
The life and pensions group has been looking to offload Lombard since late last year. The division, which sells tax-efficient insurance products to ultra-rich clients, has been struggling with uncertainty in its core Luxembourg and Belgian markets.
The total value of the deal, expected to close in the second half of 2014, could go up to 356 million pounds in five years, based on the value of Lombard’s assets under administration.
Friends Life said it would buy back shares worth 261 million pounds after the completion of the sale.
The amount available for a share buyback is slightly below expectations, Deutsche Bank analyst Oliver Steel said, but added that the deal’s value was in line with estimates.
The disposal and share buyback will improve the cash coverage ratio of the company’s dividend to 1.16 from 1.1, against a target of 1.3, Chief Financial Officer Tim Tookey told Reuters.
Friends Life’s London-listed shares rose as much as 1.53 percent on Friday before easing back a little to trade up 1.44 percent at 324.8 pence at 1048 GMT.
Lombard, which includes Lombard International Assurance and Insurance Development Holdings, sells life assurance products through financial advisers and private banks to rich individuals in Europe, Latin America and Asia. The unit posted a 44 percent decline in value of new business (VNB) in 2013.
VNB, a key earnings measure for Friends Life, is calculated by subtracting the cost of writing new products from the money that they bring in.Get your FREE trial or subscribe now to Buyouts to find new deal opportunities, super-charge your fundraising efforts and track top managers.