ZURICH (AFP) — Swiss insurer Zurich Financial Services Group said on Friday it had agreed to pay up to 900 million euros for half of the insurance and pension operations of Spanish bank Banco Sabadell SA.
The deal, worth the equivalent of 1.42 billion dollars, would propel Zurich to the position of second-biggest insurance group in Spain, said the Swiss insurer in a statement.
It would also include the establishment of a "long-term strategic distribution partnership".
The announcement was welcomed by the market, with the stock up 7.0 percent in late morning trade to 269.25 Swiss francs, outperforming a flat stock market, which was just up 0.30 percent.
Zurich's announcement came a day after it announced that it would not bid for Royal Bank of Scotland's insurance business, and that it would recommence on Friday its 2.2 billion Swiss franc share buyback programme.
In the latest deal, Zurich will pay 650 million euros for 50 percent of Banco Sabadell's life insurance and pension companies. In addition there is an extra 120 million euros that would be paid based on future performance of the businesses.
For half of the Spanish bank's general insurance company, the purchase price is 100 million euros, with a earn-out component of up to 30 million euros.
The insurer said in a statement that the transaction marked a "significant expansion" of its operations in Spain, and built on two acquisitions made in recent months by the group.
"We have always said we wanted to increase our market position in this important market," Zurich's chief executive officer James Schiro said.
Credit Suisse analyst Peter von Moos rated the news as "clearly positive as the management is committed to deliver on its stated financial targets".
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