Chesnara PLC (LSE:CSN) has struck a 'highly accretive' deal to buy HSBC Life’s UK business for £260 million, bolstering its presence in the life insurance market, funded by a £140 million equity raise.
The acquisition adds around £4 billion in assets under administration and 454,000 customer policies to Chesnara’s portfolio.
HSBC Life (UK) provides life protection policies and investment bonds, and reported eligible own funds of £314 million as of the end of 2024.
Chesnara said the deal is expected to generate more than £800 million in lifetime cash, with over £140 million expected to flow into the group in the first five years after completion.
CEO Steve Murray said: "This highly accretive transaction will allow us to build on our strong, 20-year track record of uninterrupted dividend growth.
"It is also a further example of a major financial institution choosing to work with us, enhancing our reputation as a leading life and pensions consolidator.
"We are continuing to see a strong M&A pipeline across our group, which we are well-positioned to execute on."
The life and pensions group also flagged potential cost and capital savings, alongside further growth opportunities.
To part-fund the purchase, Chesnara is launching a fully underwritten rights issue at 176p per share.
The offer will raise £140 million by issuing 10 new shares for every 19 existing ones.
The remainder of the funding will come from a £65 million drawdown on its revolving credit facility, which has been increased to £150 million, and £55 million in internal cash.
The company expects to complete the transaction in early 2026, subject to regulatory approval.
Chesnara added that the deal should support an increase in dividends, with a 6% uplift anticipated in the final payout for 2025 and the interim dividend for 2026.
It also expects greater liquidity in its shares and a higher free float, with potential eligibility for inclusion in the FTSE 250 index.