(Photo: Thinkstock)
One way to upset your shareholders is to do a far bigger deal than what they thought you'd consider. To get them really fired up, you could overpay at the same time. AXA SA's newish CEO Thomas Buberl has chosen to do both with the $15.3 billion acquisition of U.S. insurance peer XL Group Ltd.
AXA didn't appear to be seeking major purchases. The market hadn't been primed to expect any deals much larger than 1 billion euros ($1.2 billion). By contrast, XL will radically reshape its new owner. The target specializes in property and casualty insurance — fire, theft, and disaster — and it is these lines that will now dominate AXA rather than life insurance and savings.
(Related: AXA Talks More About U.S. Life Spinoff)
True, the deal means more scale and diversification, an advantage in underwriting bigger and more complex risks for corporations. The shift to insurance from savings means AXA's fortunes won't be so tied to financial markets. The French company's cost of capital should, in theory, fall. The deal also finds a use for the proceeds from the planned sale of its U.S. insurance and asset management business.
