French insurance heavyweight Axa has finalized an agreement with Credit Suisse to buy its insurance division Winterthur for E7.9 billion in a deal that will see the Gallic insurer become the major player in the Swiss market.
In addition to its cash purchase Axa will also refinance E1 billion of Winterthur’s outstanding debt, of which E0.7 billion of internal loans will be redeemed to Credit Suisse at closing.
The sale makes sense for the Swiss financial services outfit as Winterthur was non-core and underperforming. However, the motivation for the purchase is less clear. Axa will gain top spot in Switzerland, while significantly increasing its footprint in eastern Europe and Asia.
But the Financial Times considers the price tag to be high and in comparison to Axa’s already global outlook, Winterthur’s business is domestically weighted.
Nevertheless, Axa CEO Henri de Castries sees the purchase as a right step: I am confident that the combined efforts of Axa and Winterthur’s many talented and dedicated professionals will very positively contribute to our company growth, on top of our existing Ambition 2012 target.