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Prudential to buy Skandia unit
STOCKHOLM, Sweden -- Prudential Financial has agreed to buy the U.S. unit of Skandia for $1.15 billion as the Swedish financial services group attempts to cut its debt. Skandia, which has been hard hit by the stock market plunge, had been widely expected to retreat from the U.S. market and focus on developing its European core insurance business. "Skandia expects lower future growth and profitability in the U.S. market, given the change in markets conditions and its impact on American Skandia's rating environment," the company said in a statement. Shares in Skandia, which have plunged 76 percent this year, were up 12.9 percent to 23.60 Swedish crowns in early Stockholm trading on Friday. American Skandia is the largest distributor of equities-linked savings products, or annuities, through independent U.S. financial planners. It also provides mutual fund services. Prudential said the acquisition would significantly improve the distribution of its annuities in North America. "This acquisition presents us with attractive growth possibilities," Chief Executive Art Ryan said in a statement. "And it is consistent with our strategy to acquire businesses that complement and enhance our existing businesses that grow and protect our customers' wealth." The deal propels Prudential into a top 10 spot in the annuities sector. Skandia said the sale would results in a loss of 4.4 billion Swedish crowns ($495 million), which it would include in its fourth-quarter results. The deal, which is subject to regulatory approval, is expected to be completed in the second quarter of 2003. "The price seems very low but in reality, when debt is included, the net loss is less than 4.4 billion [crowns],'' Marc Thiele, an analyst with Commerzbank, told Reuters. "I think it is a positive deal for Skandia.'' The deal is expected to reduce Skandia's assets under management to 536 billion from 780 billion crowns. "It will be a much smaller company but now Skandia can focus on its core business and expand in a more controlled fashion,'' a representative of one of Skandia's biggest shareholders told Reuters.
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