Swiss Re changes financing plans for acquiring GE

Swiss Re says a “very strong capital position” has allowed it to adjust the way it plans to finance its proposed purchase of GE Insurance Solutions.
“Swiss Re expects to raise US$3.9 billion instead of US$4.7 billion in equity securities to fund the GE Insurance Solutions acquisition,” the company announced recently on its Web site. “In place of the US$800 million in planned equity, Swiss Re will use internal-generated cash.
“In addition, the regulatory approval process is well on track for the expected mid-2006 closing of the transaction.”
The expected total consideration for the acquisition of GE Insurance Solutions after closing adjustments remains unchanged at US$7.6 billion.
“Due to Swiss Re’s very strong capital position and operating cash flows, the company expects to increase its internal funding of the transaction by approximately US$800 million to US$900 million, with a corresponding reduction in planned equity raising,” the company announced. “As previously announced, the total external capital funding will have both equity and hybrid debt components.”
Swiss Re had already raised CHF1 billion (US$783.9 million) in mandatory convertible securities as of December 2005.
Swiss Re and GE have agreed the portion of the purchase price payable in Swiss Re shares is to be reduced to US$2.4 billion. In addition, US$500 million worth of mandatory convertible instruments is expected to be issued to GE, resulting in total ownership in Swiss Re by GE of less than 10%.