Finnish insurer Sampo's bid for rival Topdanmark "sensible" - Bank of America

Investing.com -- Finnish insurer Sampo (HE:SAMPO) has agreed to acquire the rest of the shares in Topdanmark (CSE:TOP) it does not already own in a deal that values its Danish peer at 33 billion Danish crowns, according to a statement from the two companies on Monday.

Shares in Sampo were lower in mid-afternoon European trading, while Topdanmark's stock price surged by more than 20%.

Under the terms of the transaction, Topdanmark shareholders will receive 1.25 newly issued Sampo A shares in exchange for each share held by Topdanmark. The plan represents a 27% premium to Topdanmark's Friday closing price.

Sampo added that its board will deploy 800 million euros in share buybacks to offset any possible "share count dilution," as well as the possible "squeeze-out" of Topdanmark minority stakeholders. Analysts at Bank of America Securities said this amount was higher than the 700 million euros in share repurchases they had initially anticipated.

Once completed, Sampo said it intends to use the acquistion to "strengthen its position as one of the leading insurers in the Danish [property and casualty] insurance market and to consolidate [its] leadership position in the Nordics." The deal is expected to lead to annual cost savings of 65 million euros and contribute an additional 30 million euros in income per year.

"We think this looks like a sensible transaction," the BofA analysts said in a note to clients. "Near-term, Sampo will benefit from a buyback, integration of Topdanmark and delivery of synergies (including potential over-delivery of synergies). Longer-term, Sampo will become a cleaner story, without any [mergers and acquistions] overhang."