The German group said yesterday it was buying a 93.9 per cent stake in the Turkish insurer from local lender Yapi Kredi Bank. After closure of that deal, it will make a mandatory tender offer for the remaining 6.1 per cent stake.
Turkey’s growing population and rising standard of living have prompted a sharp increase in demand for car, property health and life insurance, but price competition among insurers is intense and many have suffered losses in recent years.
JP Morgan analysts said the price implied a much higher valuation than that paid by German insurer Talanx for deals in Poland last year, though they noted this could reflect a much faster-growing insurance market in Turkey.
The acquisition is Allianz’s largest deal since 2007 and uses up over two-thirds of the roughly 1 billion euros the group has earmarked as an annual takeover budget.
Allianz finance chief Dieter Wemmer sidestepped a question on whether the YKS takeover limited room for more deals.
“Transactions you can never force through ... but a few hundred million, plus or minus, we probably will find in our resources to pay for it,” he said.
Espirito Santo analyst Joy Ferneyhough said emerging market purchases had again become an option for big insurers like Allianz and France’s Axa, which face sluggish developed markets in the wake of the global financial crisis.
“The larger conglomerates are becoming more comfortable that the worst of the crisis is over,” Ferneyhough said.
She retained a ‘neutral’ rating on Allianz shares.
Allianz said squeezing out minority YKS investors would make it easier to achieve efficiencies from the deal.
YKS shares dropped 9.5 per cent, having risen sharply recently in anticipation of a deal, while Yapi Kredi Bank’s shares fell 0.7 per cent.
Under a so-called bancassurance agreement over 15 years, Allianz will also get the right to sell insurance through Yapi Kredi’s network of 928 bank branches, Turkey’s fifth largest, with 6.5 million customers.
With a population of nearly 75 million whose average age is under 30, Turkey offers lucrative growth opportunities for global insurers.