Holland's woes are the Canadian capital market's gain, as the Dutch parent of ING Canada move Tuesday to sell control of the property and casualty insurer to public investors.
ING Groep, the Dutch financial services conglomerate, is selling $1.75-billion of shares in its Canadian insurance subsidiary, a deeply discounted sale that comes as the parent struggles to rebuild its balance sheet.
While the terms of this deal are a shock - ING Groep is taking a 22 per cent haircut on the public portion of the sale - the fact that the insurance company is being sold is no surprise. ING Groep has said for some time that home and auto insurance is no longer a core business, and has sold units in other countries.
That led to speculation ING Canada, a leading player with 11 per cent market share in the fragmented P&C sector, could attract a takeover.
However, it's now clear ING Groep couldn't wait for a rival to come knocking. In a deal that resembles Brascan's sale of controlling stakes in John Labatt, Noranda and MacMillan Bloedel a generation back, the Dutch company simply unloaded most of its position with an old-fashioned bought deal, foregoing any takeover premium.
When the dust settles, ING Groep will hold between 8.9 per cent and 13.2 per cent of the Canadian insurer, depending on whether the underwriters choose to exercise their options on stock. And you can pretty much count on that option being used - these shares are flying off the shelf late Tuesday.
CIBC World Markets Inc. and TD Securities will sell $900-million of ING Canada stock at $26.35 a share to public shareholders. That's a 22 per cent discount to the closing price of ING Canada Tuesday on the Toronto Stock Exchange.
Most recent bought deals come at a 6 to 8 per cent discount to the closing price of the stock. ING Groep had to accept less money to get a deal this size done.
In addition, a minimum of $850-million in stock is being sold at $25 each through a private placement, to institutional investors. This lead order is being run by CIBC World Markets and Goldman Sachs, and comes at a 5 per cent discount to the public portion of the deal, and a 26 per cent discount to the closing price.
"With the proposed transactions, for the first time in recent history, a Canadian-listed and controlled company will assume the leadership position in the Canadian home, auto and business insurance industry," said Charles Brindamour, president and CEO of ING Canada. It's entirely possible that ING Canada uses its newfound freedom to begin snapping up rivals, as it is no longer constrained by the strategic and financial issues that dog its former parent.