What: Shares of StanCorp Financial Group (UNKNOWN:SFG.DL) are trading higher by nearly 50% after Japanese life insurer Meiji Yasuda Life Insurance Co. agreed to acquire the company in an all-cash transaction. The deal values StanCorp at $115 per share, or approximately $5 billion.
So what: Facing poor demographic trends domestically, Japanese life insurers are tapping into the United States to grow their business. Though it has a modest presence in the United States, Meiji Yasuda Life Insurance Co. intends to make The Standard its primary U.S. presence and partner.
The acquisition was unexpected. StanCorp CEO Greg Ness said in a statement that "While we were not looking for a buyer, Meiji Yasuda's proposal presented a tremendous opportunity to create value for all of our stakeholders -- providing a substantial cash premium to our shareholders while enabling us to maintain our current operations and valued employees."
Terms of the agreement allow StanCorp Financial Group to pay a final annual dividend to shareholders of up to $1.40 per share prior to closing, slightly higher than last year's $1.30 annual dividend. The agreement also includes a minimal termination fee of $90 to $180 million should a competing bidder enter to make a better bid. The deal is expected to close in the first quarter of 2016.
Now what: The market sees little reason the deal won't go through, as StanCorp stock now trades at more than $113, a very modest discount to the $115 per-share bid. Another bidder probably isn't in the cards, given the offer was made at a substantial 49.9% premium to its one-month average share price as well as the fact that the StanCorp management team has agreed to stay in place to lead the company after its acquisition.