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Dai-ichi Life, one of Japan’s largest life insurers, plans to take a 15 per cent stake in M&G as part of a partnership that will help the FTSE 100 asset manager deepen access to fast-growing Asian markets.
M&G will become Dai-ichi Life’s preferred asset management partner in Europe as part of the tie-up, the two groups said on Friday, sending shares in the UK company up as much as 7 per cent in morning trading in London.
The deal is expected to generate at least $6bn in new business flows into funds managed by M&G over the next five years, half of which will go into the group’s “high-alpha strategies” that command higher fees.
It is the latest example this year of a Japanese life insurer tying up with a UK group, following an announcement by Meiji Yasuda in February that it planned to purchase about 5 per cent of Legal & General. It also follows a flurry of dealmaking last year by Japanese financial groups in Europe and the US.
M&G chief executive Andrea Rossi said: “This partnership is about growth, distribution and product development,” telling the Financial Times that the deal boosted “our growth ambitions internationally and in private markets, and gives us distribution access to Japan and Asia where we want to expand”.
For Dai-ichi Life, the deal will generate at least $2bn in new business flows and continue its push into markets outside Japan. It comes after the company said earlier this month it would raise its stake in UK alternative asset manager Capula Investment Management from 5 per cent to 15 per cent.
M&G and Dai-ichi Life have similar models: a combination of permanent capital from a parent insurer and an asset management business. Dai-ichi Life has ¥67.5tn ($470bn) in assets compared with M&G’s £345.9bn.
The two groups said they would consider collaborating on life insurance in Europe and Japan, as well as pursuing co-investment opportunities in asset management. Tetsuya Kikuta, Dai-ichi’s chief executive, said the partnership would act as a “spearhead to develop our presence across Europe and the UK, accelerating our strategy to become a global top-tier insurance group”.
“There appear to be no downsides to this partnership, and we expect it to be taken well by investors,” wrote Philip Kett, an analyst at Jefferies, on Friday.
The deal comes as the return of inflation to Japan, and a rapidly ageing population, has triggered a push to improve the country’s asset management capabilities. The government has been driving asset managers and insurers to build expertise and deepen international ties, both to give them access to new markets and to bring knowledge home.
It also follows a spate of tie-ups last year between Japanese financial services groups and US and European companies.
Among them, Mizuho Financial Group announced a strategic partnership with Golub Capital, in which it bought a minority stake in the credit asset manager; European alternatives manager Tikehau Capital struck a strategic partnership with Japan’s Nikko Asset Management; and Dai-ichi Life also bought a minority stake in Los Angeles-based alternative investment manager Canyon Partners.
Nomura’s recent deal to buy up Macquarie’s US and European public asset management business for $1.8bn was its biggest international expansion since Lehman Brothers.
As part of the deal announced on Friday, Dai-ichi has agreed to a lock-up on M&G shares for two years and a standstill restriction not to increase its position above 19.99 per cent. Dai-ichi will also have a right to appoint a director to M&G’s board.
