Macif well positioned after €1.75bn M&A hat-trick

Macif sold the first ever transaction to include RT1, Tier 2 and Tier 3 tranches on 14 June, a €1.75bn three-tranche deal that attracted some €12.1bn of demand from more than 400 accounts, as the insurer successfully raised a large part of the financing for its transformative acquisition of Aviva France.

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Following the €3.2bn acquisition of Aviva France, the mutual Aéma Groupe — formed by the merger of Macif and Aésio — is set to become a top five player across insurance markets in France and the sixth largest asset manager in France, while the transaction will double the revenues of Macif (Mutuelle Assurance des Commerçants et Industriels de France et des cadres et des salariés de l’Industrie et du Commerce).

The Aviva France acquisition was announced in February and market participants had been eagerly anticipating the €1.75bn of subordinated issuance Macif had earmarked for the financing.

The transaction was announced on Tuesday, 8 June, and the issuer connected with over 85 investors in calls that week. It announced a €400m Restricted Tier 1 (RT1), with an expected rating of Ba1, as well as a euro benchmark fixed-to-floating rate Tier 2 and/or euro benchmark fixed rate Tier 3, both with expected Baa1 ratings.

The following Monday, 14 June, the leads went out with initial price thoughts of the 4.125% area for a €400m perpetual non-call eight RT1, the mid-swaps plus 250bp area for a euro benchmark 31 non-call 11 Tier 2, and the mid-swaps plus 130bp area for a six year euro benchmark Tier 3. On the back of an aggregate €14bn book, the pricing of the RT1 was set at 3.5%, the Tier 2 at 205bp, and the Tier 3 at 95bp, with the final books for each tranche good at re-offer ultimately €4bn, above €5.5bn and above €2.6bn, respectively, for a total of some €12.1bn comprising over 400 accounts.

“The three days of virtual roadshow conducted as part of this capital increase have again proved the great appetite of investors towards Macif’s solid business model,” the insurer said. “These transactions constitute a significant part of Aviva France’s acquisition financing and the proceeds of the notes will be eligible for inclusion in Solvency II regulatory capital, reinforcing the newly formed group capital base.”

The acquisition saw Aéma Groupe’s pro forma Solvency II ratio fall to 159% at end-March 2021, but it has committed to increase solvency to 190% by 2024 by organic capital generation, and André Bonnal, FIG syndicate at Crédit Agricole CIB, said the pricing achieved by Macif showed that investors had bought into its story.

“The final spread outcome is very close to the likes of La Mondiale and Groupama,” he said, “and while Macif is expected to be a better name on paper than those two in future, it’s impressive that on the inaugural, M&A trade they were able to substantially compress the premium to these established names to virtually zero.”

The Tier 2 came around 2bp wide of where Bonnal put fair value for a comparable La Mondiale trade and the Tier 3 around 5bp wide.

“There was a little more juice in the RT1,” he added, “but it’s a non-investment grade product and they needed to derisk that tranche in particular.”

Bonnal said the outcome was supported by the decision to split the financing into three tranches, rather than the potential two, which would have meant one being €1.35bn given the €400m limit to the RT1’s size.

“It was very smart because it essentially allowed them to target different pockets of investors and limit as much as possible the overlap between the different tranches,” he said. “€1.35bn would have been a very big size for a newcomer, especially in the context of an M&A transaction they had to complete.

“They also targeted maturities across the curve, so all in all a very orderly split between the three tranches.”