Update: Delta Lloyd Shareholders Approve Contested Plan to Raise $720M

March 17, 2016 by and

Delta Lloyd NV rose to the highest since December after shareholders approved a contested plan to raise 650 million euros ($720 million) in a rights offer to improve its capital levels.

The stock gained as much as 6.6 percent in Amsterdam trading. Delta Lloyd rose 14 percent on Wednesday after Fubon Financial Holding Co., one of its largest investors, unexpectedly pledged to support the move.

About 78 percent of Delta Lloyd shareholders who voted approved the capital increase at an extraordinary meeting of stakeholders in Amsterdam on Wednesday. The insurer needed a two-thirds majority because only 48 percent of shareholders’ votes were cast.

Fubon, based in Taiwan, had previously supported Highfields Capital Management LP, Delta Lloyd’s largest shareholder, in a court bid to block the vote. The Dutch insurer on Wednesday agreed to back efforts by Fubon, which holds about 7 percent of the insurer, to increase its investment and will also nominate a supervisory board member designated by the investor if it raises its stake to 15 percent.

“It remains essential for Delta Lloyd to deliver on its promised actions and seek a restructuring to existing longevity contracts,” said Edmond Christou, an analyst at Bloomberg Intelligence. “It also needs to speed up the release of risk margin and capital requirements from the run-off business which will boost cash-flow generation.”

Delta Lloyd was up 3.1 percent at 6.24 euros at 9:35 a.m., giving the company a market value of 1.4 billion euros.

Delta Lloyd has been under pressure from shareholders after the European Union introduced stricter capital requirements for insurers in January under rules known as Solvency II. Delta Lloyd said in February that its solvency ratio stood at 131 percent at the end of 2015, and that the rights offer will raise that to between 140 percent and 180 percent.

Delta Lloyd had “essentially bought Fubon’s vote” with the deal at the expense of all other shareholders, Highfields said in a separate statement on Wednesday. Delta Lloyd, which agreed Fubon may act as a sub-underwriter for its own part of the rights offer, has an obligation to offer the same arrangement to all other shareholders, Highfields said.

Delta Lloyd and Fubon also agreed to “explore opportunities” for further cooperation in businesses such as asset management and reinsurance agreements.

“We question whether the strategic partnership will be a success,” Marcel Houben, an analyst at SNS Securities, said in a note to clients, highlighting the limited geographical overlap and different cultures between the two companies.

–With assistance from Corina Ruhe, Martijn van der Starre and David de Jong.

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