MMC Contrarian to Acquire MBF Life Insurance for $195 million

MMC Contrarian Limited (MMC) (ASX: MMA) has signed agreements to acquire Bupa Australia's Life Insurance business (MBF Life) and Wealth Management business (ClearView Retirement Solutions) for $195 million.

As part of the transaction, MMC has entered into an exclusive alliance with Bupa Australia to market its life insurance and wealth management products to Bupa Australia's 2.9 million private health insurance customers for a period of 10 years.

MMC also announces that, in conjunction with the acquisition, the Board has appointed Mr Simon Swanson as the new Managing Director of MMC. Mr Swanson is a former CEO of CommInsure Insurance and has 30 years experience across life insurance, general and health insurance as well as funds management. Our previous Managing Director, Mr Alex Hutchison, will become the CEO of MMC's Wealth Management and Advice business with responsibility for the expanded businesses of ComCorp and ClearView.

MMC's newly appointed Managing Director and CEO, Mr Simon Swanson, said: "The acquisition of Bupa Australia's Australian life insurance and wealth management businesses represents a major opportunity to transform MMC into a significant, independent wealth management company in the Australian market place. The exclusive alliance with Bupa Australia represents a key growth platform for the medium term. We are delighted to be partnering with an organisation of Bupa's capabilities and look forward to delivering financial products and services to Bupa's customers".

MMC's acquisition of MBF Life and ClearView, together with associated costs, will be fully funded through:

Existing cash resources of MMC of $69.2 million;
A fully underwritten institutional placement conducted on Thursday 25 March 2010 to raise $61.7 million which is conditional on shareholder approval at a meeting on 30 April 2010 (the 'Conditional Placement') (refer below); and
A fully underwritten non-renounceable pro-rata entitlement offer to raise A$73.3 million (the 'Entitlement Offer') Commonwealth Securities Limited will underwrite the Conditional Placement and the Entitlement Offer.

The Entitlement Offer will be made under a prospectus (the Prospectus) which was lodged today with ASIC. A copy of the Prospectus follows this announcement, together with a copy of an Investor Presentation and Appendix 3B for the Entitlement Offer.

The acquisition provides a compelling opportunity to create significant value for MMC shareholders.

The acquisition price for MBF Life and ClearView represents an attractive discount of 22.6% to the assessed embedded value of $252 million (inclusive of the value of future franking credits) or an 8.5% discount to the assessed embedded value of $213 million (excluding the value of future franking credits).

Synergies from the acquisition are likely to be substantial. The acquired businesses represent an ideal platform from which to grow the combined products and services of MBF Life, ClearView and ComCorp. In addition, MMC estimates that annual cost savings of approximately $6.5 million will be achieved progressively over the first year.

MMC will remain debt-free post acquisition and will be in a strong capital position with approximately $36.5 million of surplus capital above regulatory requirements and residual cash of approximately $11.7 million, before settlement of any one-off integration and restructure costs associated with the acquisition.

As noted above, MMC is pleased to announce that it has raised a total of $61.7 million of ordinary equity via a Conditional Placement to institutional investors at a price of $0.50 per share. The Conditional Placement is fully underwritten and is subject to shareholder approval at a meeting scheduled for 30 April 2010.

Mr Swanson has also committed to subscribe for $1 million of shares under the Conditional Placement. Completion of the acquisition and the Conditional Placement are subject to MMC shareholder approval at a general meeting to be held on 30 April 2010. The general meeting documents will be released to ASX separately, and include the material terms of Mr Swanson's employment contract.

Completion of the acquisition is also subject to regulatory approvals, including from APRA and FIRB under applicable legislation. MMC expects the regulatory approval process to be finalized by the end of June 2010.

MMC's largest shareholder, GPG, supports the transaction and has stated that it intends to vote its 68% shareholding in favour of all resolutions including the Conditional Placement. GPG has also committed to take up its full entitlement in the Entitlement Offer.

Under the Entitlement Offer, MMC will raise $73.3 million of equity through a fully-underwritten non-renounceable entitlement offer.

Eligible shareholders will be invited to subscribe for 1 new MMC share ('New Share') for every 1 existing share held as at 7.00pm (Australian Eastern Standard Time 'AEST') on Wednesday 7 April ('Record Date'), at an Offer Price of A$0.50 per New Share.

The Offer Price represents a 10.6% discount to the pro forma net asset value of the combined group of $0.56.

The Entitlement Offer is non-renounceable and entitlements will not be tradeable on the ASX or be otherwise transferable. Shareholders who do not take up their full entitlements will not receive any value in respect of entitlements they do not take up and their percentage shareholding will be diluted.

Eligible Shareholders can choose to take up their entitlements in whole, in part or not at all. Eligible Shareholders who take up their Entitlement in full can also apply for New Shares in excess of their entitlements. Eligible Shareholders are not assured of being allocated any New Shares in excess of their Entitlement and MMC retains final discretion to scale back applications as appropriate to ensure equity for all shareholders.

Source: MMC Contrarian, 8 March 2010

April 2010