Manulife Financial Corporation (MFC) has agreed to purchase a 49% stake in ABN AMRO TEDA Fund Management Co. for US$156 million in cash. The joint venture will be named Manulife TEDA Fund Management Co. Ltd. It will offer traditional retail and institutional asset management services in the Chinese market. Established in 2002, ABN AMRO TEDA Fund Management currently has assets of US$3.8 billion under management.

The 51% stake is owned by Northern International Trust, part of Tianjin TEDA Investment Holding Co., a company owned by Tianjin city in China. Manulife expects to complete the stake purchase in the first quarter of 2010. The company also expects this transaction to add to its earnings in the first year.

Manulife is also bolstering its capital position with a $2.5 billion common equity raise. The company recently announced that it has agreed to issue common shares to a syndicate of underwriters for an aggregate price of C$2.5 billion (US$2.37 billion) at C$19 each in a “bought deal” public offering in Canada. Manulife also intends to retire roughly $1 billion of outstanding debt under its credit facility with Canadian chartered banks using other cash resources of the company.

We believe that the stake purchase and equity offering are a strategic fit. The buying of the 49% stake will help the company to expand its business significantly in China. This equity raise would enable the company to significantly strengthen its capital position and to have access to the highest level of capital since it went public. Additionally, the company would have the flexibility to make meaningful acquisitions and explore growth opportunities.

Zacks Investment Research

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