MetLife to acquire BBVA’s Provida for $2bn

March 2013  |  DEALFRONT  |  MERGERS & ACQUISITIONS

Financier Worldwide Magazine

MetLife Inc. announced in February that it had entered into a definitive agreement to purchase Chilean pension manager AFP Provida SA from the Spanish bank Banco Bilbao Vizcaya Argentaria (BBVA). The acquisition of Provida will cost MetLife approximately $2bn, which the company will provide from its existing cash balances.

According to a statement released by MetLife, the terms of the agreement will see the company, the largest life insurer in the US, conduct a public cash tender offer for all of the outstanding shares of Provida. BBVA has agreed to transfer its 63.4 percent stake in Provida to MetLife. Immediately following the announcement of the deal shares in Provida fell 6.34 percent.

The acquisition of Provida, which also includes a small asset management business, is in keeping with MetLife’s wider strategy of capitalising on opportunities for growth in the emerging markets. Steven A. Kandarian, chairman, president and chief executive officer of MetLife, said “With this acquisition, MetLife is delivering on a key component of our strategy – expanding our presence in emerging markets. MetLife is a leader in both life insurance and annuities in Chile, and Provida will further strengthen our position by adding the country’s top pension franchise. The acquisition also supports our focus on shifting our business mix to less capital intensive products. We expect it to be immediately accretive to earnings.”

The Chilean private pension system has been attracting a great deal of attention of late, with its high returns and healthy rates of economic growth proving popular with investors. In October Principal Financial Group agreed to acquire Chilean pension firm AFP Cuprum for around $1.51bn. Provida, the largest pension fund manager in Chile currently has assets worth around $45.3m under management and approximately 1.8 million contributors, as of 30 September 2012. According to the Chilean pension regulator, the nation’s pension providers manage a total of $160bn in assets. Provida is a market leader in both the value of the assets it manages, and the number of contributors within its scheme.

Alongside the sale announcement, BBVA announced earnings of €1.68bn for 2012, representative of a 44.2 percent drop compared to the previous year. Adjusted profit for the period was €4.41bn.

BBVA has been struggling of late to cover its exposure to the dwindling domestic real estate market. As such, the bank has been attempting to sell off assets to raise much needed funds. BBVA has recently attempted to dispose of its operations in Chile, Mexico, Peru and Colombia. In November 2012 it agreed to sell its stake in Mexico’s Administradora de Fondos para el Retiro Bancomer S.A. De C.V to local investors for $1.6bn. In December BBVA also announced that it was selling its stake in a Colombian pension fund for $530m.

William Wheeler, chief executive officer and president of MetLife’s Americas division, said “The assets, customers and intellectual capital this transaction brings into the MetLife family of businesses will transform our operations in Chile.” Indeed, MetLife anticipates that the acquisition of Provida will boost the company’s operating earnings in emerging markets by 3 percent. The purchase of Provida is also expected to add 5 cents per share in 2013, rising to 15 cents per share the next year. 

The acquisition of Provida, while consolidating the company’s position in Chile, is MetLife’s latest move aimed at continuing its diversification beyond its traditional American market. In 2010 the company purchased Alico from AIG for $16bn. Alico employs over 12,000 staff and operates in more than 50 countries worldwide. Historically, MetLife has used acquisitions to fuel growth in other markets, most notably in 2005 when it purchased Travelers Life & Annuity from Citigroup Inc for $11.7bn – an acquisition which increased the company’s exposure in Japan, Australia and the UK. In 2002 MetLife also purchased the biggest life insurer in Mexico – Aseguradora Hidalgo SA – for approximately $962m. Additionally, it acquired the Chilean insurance units of Santander SA for $200m.

Although MetLife’s board has approved the Provida acquisition, it is still subject to regulatory approval. MetLife anticipates that the purchase will be completed in the third quarter of 2013. 

BofA Merrill Lynch acted as financial adviser to MetLife. Skadden, Arps, Slate, Meagher & Flom LLP and Prieto y Cia served as legal advisers.

BY

Richard Summerfield