Lincoln Financial Group’s $3.3 Billion Acquisition of Liberty Life Assurance Company

Goldman Sachs & Co. LLC acted as financial advisor to Lincoln Financial and Wachtell, Lipton, Rosen & Katz acted as legal advisor. Barclays acted as financial advisor to Liberty Mutual, and Skadden, Arps, Slate, Meagher, & Flom LLP acted as legal advisor.

Lincoln Financial Group (NYSE: LNC) announced today that it has entered into a definitive agreement to acquire Liberty Life Assurance Company of Boston from Liberty Mutual Insurance Group. Upon completion of the transaction, Lincoln Financial will retain Liberty’s Group Benefits business and reinsure Liberty’s Individual Life and Annuity business to Protective Life Insurance Company. The acquisition, which is expected to create a single, powerful Group Benefits operation with industry-leading products, services, and capabilities, is expected to be completed in the second quarter of 2018, pending regulatory approvals and other customary closing conditions.

With this acquisition, Lincoln Financial is poised to become a Group Benefits market leader, as the combined Fully Insured Disability sales market share would be ranked number one at 14 percent, and the combined Total Life and Fully Insured Disability sales market share rank would be number three.1 Lincoln Financial will expand its distribution and product reach, strengthen its capabilities, and leverage new opportunities to benefit customers and shareholders by tapping into Liberty’s competitive advantages, which include enhanced absence management, extensive claim clinical resources and broader broker and consultant relationships.

Under the terms of the agreement, Lincoln Financial Group will pay Liberty Mutual approximately $3.3 billion, which consists of $1.446 billion total net investment for the Group Benefits business, including a purchase price of $1.021 billion and $425 million in required capital. The remaining components of the payment to Liberty Mutual include $410 million of individual life and annuity value paid by Protective Life; $1.202 billion associated with excess capital in LLAC; and $211 million of tax items. The acquisition is expected to be accretive to Lincoln Financial’s earnings per share in 2019, excluding integration costs, and will be financed with cash and the issuance of debt. Lincoln’s shareholder buyback program will be temporarily suspended, and is expected to resume no later than the third quarter of 2018.

Skadden is advising Liberty Mutual Insurance Group with a team including Financial Institutions M&A partner Todd Freed (Picture); Tax partner Hal Hicks (Washington, D.C.); Executive Compensation and Benefits partner Neil Leff; Financial Institutions associate Elena Coyle; Corporate associate Barry Chang (Palo Alto); Intellectual Property and Technology counsel‎ James Talbot; and Executive Compensation and Benefits associate Young Park (Boston).

 

Involved fees earner: Todd Freed – Skadden Arps Slate Meager & Flom; Barry Chang – Skadden Arps Slate Meager & Flom; Elena Coyle – Skadden Arps Slate Meager & Flom; Hal Hicks – Skadden Arps Slate Meager & Flom; Neil Leff – Skadden Arps Slate Meager & Flom; Young Park – Skadden Arps Slate Meager & Flom; James Talbot – Skadden Arps Slate Meager & Flom;

Law Firms: Skadden Arps Slate Meager & Flom;

Clients: Liberty Mutual Group, Inc.;