Chesnara Acquires HSBC Life (UK) in £260M Deal, Raises £140M via Rights Issue
Why we think this is very good
The acquisition of HSBC Life (UK) represents a significant strategic and financial opportunity for Chesnara. The transaction is expected to enhance the group's future cash generation, with lifetime cash generation in excess of £800 million and £140 million of cash generation expected in the first five years. The financing structure is well-designed, maintaining Chesnara's balance sheet strength, and the regulatory requirements are in progress. While there are some execution risks to be managed, the overall impact on Chesnara's earnings and growth prospects is very positive.
Key Points
- Chesnara to acquire HSBC Life (UK) for £260 million
- Transaction expected to bring an additional £4 billion of assets under administration and 454,000 policies
- Lifetime cash generation from the acquisition estimated to exceed £800 million, with £140 million in the first five years
- Acquisition to be funded through a combination of existing cash, debt, and a £140 million rights issue
- Regulatory approval from the PRA required for completion
Summary
Chesnara plc has announced the acquisition of HSBC Life (UK) Limited, a specialist life protection and investment bond provider in the UK, for a total consideration of £260 million. The acquisition is expected to bring Chesnara an additional £4 billion of assets under administration and approximately 454,000 policies, transforming the group's scale. The transaction is anticipated to enhance Chesnara's future cash generation, with lifetime cash generation in excess of £800 million and £140 million of cash generation expected in the first five years post-acquisition. The acquisition will be funded through a combination of £55 million of existing cash resources, £65 million drawdown from an increased £150 million revolving credit facility, and a fully underwritten £140 million rights issue. The deal is expected to be highly accretive and support Chesnara's strong dividend trajectory.