Chesnara PLC's (LSE:CSN) agreement to buy Scottish Widows Europe for €110 million has prompted brokers to frame the transaction as both a pricing win and a further step in building a European closed-book consolidation platform.
Panmure Liberum said the agreement, coming after the completion of the HSBC UK Life deal, “demonstrates the capability to manage multiple deals and work with some of the largest financial institutions”.
Peel Hunt, meanwhile, called the deal metrics 'attractive', while Panmure also called them 'excellent'.
Chesnara expects the book “to release €250m of cash over the lifetime of its policies, including €100m over the next five years”.
Panmure said the new acquisition “accelerates the positive free cash flow inflexion point” and “elongates the predictable steady cash flow profile beyond the next five years”.
It went on to say that this “will then lead to questions on whether capital distributions should also be accelerated or reinvested in other attractively priced deals for future growth, or both”, while estimating dividend cover from cash of 1.9 times by FY27E.
Peel said the deal “marks Chesnara’s entry into the Luxembourg life market”, and noted that Scottish Widows Europe policyholders are “based in Germany, Austria, and Italy”.
It also noted the move provides “a complementary geographic fit with Chesnara’s existing operations in the Netherlands and Sweden”.
Peel rates Chesnara 'buy' with a 330p target price, while Panmure is even more bullish with a 400p valuation.
The shares rose 2.5p to 312p.