M&G shares surged over 6% on Friday to their highest levels in more than a year after the British Financial Group announced a partnership with Japanese insurance company Dai-ichi Life.
Dai-ichi Life, as part of this deal, will purchase a 15% stake, becoming the largest shareholder in M&G.
This allows M&G to continue to retain its ownership level and appoint an M&G director.
M&G is expecting to receive at least six billion dollars in new revenue over the next five-year period.
The balance will be made up of half Dai-ichi Life and the other half will be from the joint ventures, such as the distribution of M&G in Japan, Asia, and elsewhere.
Dai-ichi Life anticipates a new revenue stream of at least 2 billion dollars from this partnership.
Strategic expansion in the face of industry-wide scale pressure
M&G is now Dai-ichi Life’s preferred partner for asset management in Europe. This will allow the British group expand their presence on European private markets and open channels in Asia.
The two firms are also exploring opportunities to jointly develop products and invest in asset management capabilities. This reflects the increasing trend in strategic collaboration within the industry.
Globally, asset management firms are increasingly looking to form alliances or consolidate to compete better with industry giants such as BlackRock and Vanguard.
M&G and other active managers have been hit by inflation, as well as the increasing popularity of passive investments, which are less expensive.
Andrea Rossi said that the M&G chief executive believes the partnership is a validation of the company’s strategy and shows confidence in the long-term prospects.
The deal, he said, will help M&G grow in its core business areas and give it greater access to Asian markets.
Japanese insurers expand global footprint
The deal is part of a trend by Japanese financial institutions to invest abroad in search for growth and diversification.
Dai-ichi Life increased its stakes in UK-based Capula Investment Management earlier this year and also agreed to purchase a 15% interest in Australia’s Challenger.
Japanese counterparts have pursued international partnerships, such as Legal & General’s partnership with Meiji Yasuda or DWS’s discussions with Nippon Life about a joint venture with India.
M&G had previously been linked with a possible acquisition by Macquarie in Australia, but it denied the speculation.
In March, the firm posted a higher-than-expected profit due to cost cutting and a growth in assets management.
FTSE 100 inchs towards record high
This news has given the FTSE 100 a new lease of life. It is up 7.1% this year thanks to a dividend yield average of 3.4%.
Richard Hunter of Interactive Investor says that the index is only 1.4% lower than its previous record high. This could encourage further purchases and maintain the rally.
The post M&G Stock soars after Dai-ichi Life purchases 15% stake in strategic alliance may be updated as new developments unfold.
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