ReliaStar sold to ING for $6.1 billion

Dutch firm to become No. 8 insurer in the U.S., enters hot 401(k) market

Financial services

May 02, 2000|By BLOOMBERG NEWS

AMSTERDAM, Netherlands -- ING Groep NV, the largest Dutch financial services company, agreed yesterday to buy ReliaStar Financial Corp. for $6.1 billion, boosting its premium income from life insurance by 50 percent in the United States and entry into the fast-growing 401(k) pension market.

ING said it will pay $54 in cash for each ReliaStar share and assume $1 billion in debt to become the No. 8 U.S. insurer and give it the biggest network of independent insurance brokers. The offer also compensates several Relia- Star officials for about $300 million in stock options, which analysts say is unusual for such a relatively small company.

The offer was 75 percent above ReliaStar's close Thursday, before reports on the Minneapolis company's takeover sent its shares up 43 percent Friday.

"Now they have the size in the U.S. that they need to survive," said Henk Brouwer, an analyst at NIB Capital in Amsterdam. ING executives said more acquisitions are possible.

While the Dutch company paid a steep premium to ReliaStar's stock price, it paid 2.3 times book value, comparable to other publicly traded insurers. American General Corp. trades at 2.24 times book value, while Protective Life Corp. trades at 1.79 times and Lincoln National Corp. trades at 1.63 times. "It wasn't like they paid a huge amount," said Elizabeth C. Malone, an analyst at Friedman, Billings & Ramsey Inc.

Analysts said the definitive purchase agreement also includes a $150 million break-up fee, which makes it unlikely that other suitors would risk a bidding war. Relia- Star shares gained $7, or 16 percent, to close at $51 yesterday. ING shares rose 0.09 euro to 60.11 euros. The company said the purchase will add 0.1 euro in earnings per share this year and 0.34 euro a share in 2001.

ReliaStar was ING's first major U.S. purchase since 1997, when it bought insurer Equitable of Iowa Co. for $2.6 billion and investment bank Furman Selz LLC for $600 million.

It is also the first U.S. purchase for Chief Executive Officer Godfried Van der Lugt, who has been looking for takeovers for almost 18 months.

ReliaStar will boost ING to the No. 8 spot from No. 19 among U.S. life insurers, meeting ING's long-standing goal of joining the top 10 U.S. life insurers. The purchase will almost double ING's U.S. assets under management to $75 billion and will lift premium income to $12.4 billion from $8.2 billion.

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