Aegon, the Netherlands second biggest insurer and financial services company, announced that it has reached an agreement with its largest shareholder, Vereniging AEGON (the Association), providing for the sale of 350 million shares, which is projected to raise around £2 billion ($1.95 billion).
The two have been in discussions since last week (See IJ Website Sept. 11). The necessity to bolster Aegon’s capital position became crucial after the company issued its first ever profit warning, necessitated by the sharp fall in the value of its investments due to the downturn in global equity markets.
Plans call for the sale of around £1.5 billion ($1.4625 billion) worth of shares currently held by the Association outside of the U.S. An additional $500 million would be raised from the sale of shares transferred directly to Aegon, including a projected public offering in the U.S.
The sales will reduce the Association’s controlling interest in Aegon to around 25 percent of of its equity and a third of the voting rights, but it will remain the dominant shareholder in the group. It will use the funds raised by the sale to reduce corporate debt.
The Association’s Chairman, Prof. Pé Kohnstamm stated that: “We have taken this decision to ensure, in light of current market conditions, that the Association’s debt is at sustainable and comfortable levels and to create a more stable asset base. This approach has the added advantage that it assists AEGON in a cost-efficient strengthening of its capital base. The Association will continue in its role as a stable and supportive long-term shareholder in AEGON following the transaction.”
AEGON’s Executive Board Chairman, Don Shepard, was quoted in the company’s announcement as indicating that “We fully support the Association’s plans, which will also contribute to the development of AEGON. The benefits of this restructuring are threefold: AEGON gains a stronger capital base to support its strategy; the free float of our shares on the stock market increases substantially without any dilution to shareholders and there will be a better alignment of the capital and voting rights in AEGON.”
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