Helvetia to Combine With Baloise to Form No. 2 Swiss Insurer

(Bloomberg) — Helvetia Holding AG agreed to combine with Baloise Holding AG to form Switzerland’s second-largest insurance group, marking one of the biggest deals in European finance this year and the biggest in Switzerland.

Baloise investors will receive 1.0119 new Helvetia shares for each Baloise share, after adjusting for planned dividends, according to a statement on Tuesday. The deal values Baloise at about 8.4 billion Swiss francs ($10.4 billion) based on the firms’ latest closing prices, while Helvetia had a market capitalization of 9.6 billion francs as of last week. Bloomberg News reported earlier that the companies had been exploring a possible combination. 

Shares of Baloise were up as much as 4.6% early Tuesday in Zurich, while Helvetia shares climbed as much as 4.9%. 

The transaction adds to a wave of dealmaking across different parts of the European finance industry. Last month, a consortium backed by Allianz SE agreed to acquire German life insurance consolidator Viridium Group for €3.5 billion ($4 billion) including debt. There have also been a number of potential banking deals brewing in Italy, including UniCredit SpA’s pursuit of Banco BPM SpA and Commerzbank AG, as well as Banca Monte dei Paschi di Siena SpA’s bid for Mediobanca SpA. 

The deal terms of Helvetia Baloise imply that the combined group will be 53% owned by Helvetia shareholders and 47% owned by Baloise investors in what the insurers dubbed a “merger of equals”. The merged entity will have its headquarters in Basel, the city Baloise is named after. Helvetia Chief Executive Officer Fabian Rupprecht will be CEO, while Baloise Chairman Thomas von Planta is set to have the same position in the merged group.

Cost Savings

Helvetia’s combination with Baloise will result in 350 million Swiss francs of annual cost savings before policyholder participation, the insurers said in the statement. The cost savings will include layoffs, though it’s not yet clear how many jobs will be cut, Rupprecht told reporters Tuesday. The firms expect roughly 500 million to 600 million Swiss francs of integration costs in the coming years, most of which will be incurred by 2028. As a result, the executives see an additional cash generation of roughly 220 million francs. 

The combined firm, to be called Helvetia Baloise Holding Ltd., will have a business volume of around 20 billion Swiss francs across 8 countries. It will be Switzerland’s second-largest insurer with a combined market share of about 20% across its business lines of life, property and casualty insurance, according to the statement. 

The transaction is expected to close in the fourth quarter, pending approval by shareholders of both firms at meetings on May 23. Helvetia’s biggest investor Patria Genossenschaft has pledged to vote in favor of the deal. 

“I struggle to see the financial logic of this deal,” said Kevin Ryan, a Bloomberg Intelligence analyst. “Even if we consider cost savings of 350 million francs, which are before policyholder participation, that only makes up for 2.8% of the total cost base of both firms,” he said, adding that the transaction doesn’t give Helvetia Baloise sufficient scale in its foreign markets.

“It appears to be a defensive move against activist investor Cevian with making as little changes as possible.”

Insurance Deals

Baloise will not start a 100 million-franc share buyback program that had been announced in March, von Planta told reporters Tuesday. He declined to comment on discussions with Cevian Capital, the activist which holds a 9.4% stake. A representative for Cevian declined to comment.

Cevian had been pushing Baloise to focus on its core Swiss business and sell other assets, Bloomberg News has reported. The activist investor’s agitation had prompted European insurers to study whether they would want to bid for Baloise or parts of its business if they come up for sale, people familiar with the matter said in November.

The combination is adding to a list of domestic insurance deals in recent years. Aegon NV combined its operations in the Netherlands with ASR Nederland NV in 2022. The UK’s Legal & General Group Plc sold its US business earlier this year.

Morgan Stanley was lead financial adviser to Baloise, which also worked with UBS Group AG and legal advisers at Lenz & Staehelin. JPMorgan Chase & Co. and law firm Walder Wyss advised Helvetia.

–With assistance from Sam Nagarajan.

(Adds description of deal in 5th paragraph. A previous version of the story corrected the size of Cevian’s shareholding in Baloise.)

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