Toronto-based Manulife Financial Corp. says it will enter into a stock-for-stock deal to buy Boston’s John Hancock Financial Services Inc. worth $34.7 billion (US$25.6 billion). The deal will make Manulife the largest life insurance company in Canada, second-largest in North America. The announcement follows speculation last week from news sources that a merger was in the works. Under the terms of the deal, John Hancock common shareholders will receive 1.1853 Manulife common shares in exchange for each John Hancock share, a price of US$37.60, or a premium of 18.5%. Manulife says it will invest up to $3 billion (US$2.2 billion) to reaquire its shares. In the new entity, Manulife’s Dominic D’Alessandro will be president and CEO, while John Hancock’s David D’Alessandro will be COO and future president, as well as remaining chair and CEO of John Hancock. David D’Alessandro says, “We believe this transaction is good for our shareholders, our employees and our community. Not only is consolidation in our industry inevitable, but for companies of our size to compete and grow in the future, it is necessary. This transaction gives us the scale, capital base and diversity of product and distribution to grow as a business, as well as the ability for John Hancock to remain strong and rooted in the city of Boston.” Both brands will be maintained, and the company will have global headquarters in Toronto, and North American headquarters in Boston. The company will operate in 11 countries and territories, with a particularly strong interest in Asia. Combined, the new operation will have market capitalization of $34.7 billion, assets under management of $333 billion, and net income of $2.2 billion based on 2002 results. Subject to regulatory approval, the merger is expected to finalize in second-quarter 2004. Following the news, both companies saw their financial strength ratings affirmed by A.M. Best and Moody’s.