France’s AXA Group announced that it has reached an agreement with the shareholders of Russia’s second largest insurance agent network, Reso Garantia (RESO), to acquire a 36.7 percent stake in the company for a total cash consideration of around €810 million ($1.17 billion).
AXA said the “investment is expected to be accretive within 3 years.” In addition “AXA will have the option to buy out the remaining stake through calls exercisable in 2010 and 2011. AXA and RESO’s shareholders have also agreed to form a joint venture to develop an operation on Russia’s emerging life & savings market.”
RESO was founded in1991, and has built a major operation, which now has a seven percent market share. It focuses on retail motor, and is supported by a network of 18,000 agents, the second largest in Russia. In the first half of 2007, the company posted revenues of €446 million ($645.5 million) and a net income of €41 million ($59.3 million). Shareholders’ equity was €195 million ($282 million) as of June 30, 2007.
RESO’s current shareholding structure is mainly composed of the founders and management of the company (around 90 percent) and the EBRD (10 percent). AXA said “both parties will sell a stake to AXA proportionate to their holding.”
Under the terms of the agreement, RESO’s current management team will continue to run the company and rollout its successful strategy. AXA will have management control of the life joint venture.
“RESO is a high quality company, with a strong management team and a leading competitive position based on solid and healthy fundamentals,” commented Henri de Castries, Chairman of the AXA Management Board. “This strategic investment is an excellent opportunity for AXA to enter the Russian insurance market, which offers strong growth prospects and a favorable business environment. With this acquisition, AXA will further reinforce its growth profile and increase its exposure to emerging insurance markets”.
The transaction is expected to be completed during the first half of 2008. AXA also indicated that as part of the agreement, it “will grant a 6-year $1 billion credit facility to RESO’s main shareholder, fully secured by its shareholding in the company.”
Source: AXA – www.axa.com
Topics Mergers & Acquisitions Russia AXA XL
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