Insurance provider Lincoln National Corp. agreed Monday to acquire Jefferson-Pilot Corp. for about $7.5 billion in cash and stock. Jefferson-Pilot’s share price rose on the news.
The deal would combine Lincoln’s strengths in life and annuities products with Greensboro-based Jefferson Pilot’s sizable presence in fixed and variable universal life and fixed annuities, including equity-indexed annuities and other insurance, the companies said in a statement.
The deal, which is expected to close in the first quarter of 2006, will make Lincoln National the top-ranked seller of universal life product sales, as well as a leading player in group disability sales and retirement plan assets, the companies said.
In a morning conference call following the announcement, executives predicted annual cost savings of about $180 million after the two companies are combined.
“These two companies are a perfect fit,” said Lincoln National Chief Executive Officer and Chairman Jon Boscia, who will have the same role for the combined company. “I know you hear this all time, but in this case, it’s really true.”
Besides the cost savings, Lincoln National said the acquisition should immediately add to its operating earnings and build to about 6 percent or 7 percent growth by the end of 2007.
The merged company will be headquartered in Philadelphia while Greensboro will be the major center of operations for life insurance. Fort Wayne, Ind., will be the center for the company’s annuity operations, the companies said.
While possible job reductions were not specifically discussed, the companies said in a statement that they planned to share services and consolidate some functions to save money.
“This will create one of the largest publicly traded life insurance companies in the U.S.,” Boscia said. “This critical mass is becoming an increasingly important factor in achieving success in this industry.”
Cost savings were less of a motivation for the deal than the opportunity to increase sales, said Jefferson Pilot CEO Dennis Glass, who will become president and chief operating officer of the new company.
The 15-member board of directors of the combined company will comprise eight Lincoln members and seven Jefferson Pilot members. Jefferson Pilot shareholders will own roughly 39 percent of the combined company.
Under terms of the deal, Jefferson Pilot shareholders will receive 1.0906 Lincoln shares, a cash payment or a combination of shares and cash valued at $55.48 for each Jefferson Pilot share they own.
The combination offer represents a 9.2 percent premium over Jefferson’s Friday closing price of $50.79 on the New York Stock Exchange.
The deal is expected to close in early 2006, pending shareholder approval on both sides and other customary conditions.