In a surprising move, to an unsurprising trend of sell-offs, Dutch-based ING Groep announced plans to sell part of its Canadian assets.
According to yesterday’s announcement, ING expects to raise $1.9 billion from the sale by selling 63% of its stake in its Canadian insurance unit. Almost half of the money from the sale of common shares to certain institutional investors in a deal that pegs the share price at $25 per share. The rest of the money will be raised through the market sale of common stock at a price of $26.35 per share.
In opting for the two-part sale, the country’s largest P&C insurer is following a model used by CIBC, which raised almost $3 billion U.S. for the bank almost a year ago, Manulife Financial, which raised $2.75 billion U.S., and Great West Life, which raised $1 billion U.S.
The Dutch bank is selling assets and cutting 7,000 jobs after reporting its second straight quarterly loss last week on rising debt writedowns. The Amsterdam-based company, which traces its roots to 1743, received almost $13 billion lifeline from the Dutch government last year, the first company to draw on the funds.
ING Groep will give up control of the Canadian insurance business through the stock sales, reducing its 70% stake to as low as 7%, according to a separate statement from the parent company.
The bank plans to raise $850 million selling shares at $25 each to unidentified institutional investors in a so-called private placement led by CIBC World Markets and Goldman Sachs Group Inc. That’s 26% less than the ING Canada price of $33.79 before trading was halted on Tuesday at 3:09 p.m. on the Toronto Stock Exchange.
ING also plans to sell $900 million in stock to investors at $26.35 each in a public offering through CIBC and TD Securities. The sales are expected to close on Feb. 19, according to the statement.
ING Groep will not receive the proceeds of the sale, as all the financing is being done on a secondary basis. CIBC World Markets and TD Securities are leading the underwriting effort.
Originally published on Advisor.ca on February 2, 2009