Lincoln National Corp. said Monday it will acquire rival Jefferson-Pilot Corp. for about $7.5 billion in cash and stock. Executives said the new corporation would be one of the largest publicly traded life insurance companies in the nation.
The buyer, which will retain the Lincoln National and Lincoln Financial Group names, will become the nation's largest seller of universal life insurance products and a leader in group disability insurance and retirement plan assets, the companies said.
The deal is expected to be completed in the first quarter of 2006 after shareholder and regulatory approval.
Executives predicted annual cost savings of about $180 million after the two companies are combined. Philadelphia-based Lincoln National has annual sales of $5.4 billion, while Jefferson-Pilot, based in Greensboro, N.C., has annual sales of $4.1 billion.
"It makes perfect sense," analyst Tamara Kravec, who follows both companies for Bank of America Securities LLC, wrote to investors after the announcement. "The products and distribution channels of both companies are complementary and there is little overlap."
The combined company will be headquartered in Philadelphia, with Fort Wayne, Ind., becoming the center of the company's annuity business. Jon A. Boscia, Lincoln National's chief executive and chairman, will hold the same role at the combined company.
While job reductions were not specifically discussed Monday, the companies said in a statement that they planned to share services and consolidate some functions to save money.
"It would be impossible to have a merger of this size without some kind of impact" on jobs, Lincoln National spokesman Tom Johnson said. Lincoln National has about 5,200 employees, while Jefferson-Pilot has about 4,400.
Besides the cost savings, Lincoln National said the acquisition should immediately boost its operating earnings, with the merged company experiencing annual growth of 6 to 7 percent by the end of 2007.
Lincoln National has no immediate plans for Jefferson-Pilot Communications, a unit that owns and operates three television stations, 18 radio stations and a sports production and syndication business. Executives said they focused on the companies' core insurance businesses during buyout talks.
"This will create one of the largest publicly traded life insurance companies in the U.S.," Boscia said. "This critical mass is becoming an increasingly important factor in achieving success in this industry."
Cost savings were less of a motivation for the deal than the opportunity to increase sales, said Jefferson-Pilot chief executive Dennis R. Glass, who will become president and chief operating officer.
The 15-member board of directors of the combined company will comprise eight Lincoln members and seven Jefferson-Pilot members. Jefferson-Pilot shareholders will own roughly 39 percent of the combined company.
Under terms of the deal, Jefferson-Pilot shareholders will receive 1.0906 Lincoln shares, a cash payment or a combination of shares and cash valued at $55.48 for each Jefferson-Pilot share they own. The combination offer represents a 9.2 percent premium over Jefferson's Friday closing price of $50.79 on the New York Stock Exchange.
Jefferson-Pilot's shares rose $3.02, or nearly 6 percent, to close at $53.81 Monday on the New York Stock Exchange. Lincoln National's shares fell $1.54, or 3 percent, to $49.19.