GREAT-WEST LIFECO $27.18 - Toronto symbol GWO

GREAT-WEST LIFECO $27.18 (Toronto symbol GWO; Shares outstanding: 950.6 million; Market cap: $25.4 billion; TSINetwork Rating: Above Average; Dividend yield: 4.5%) has agreed to buy Irish Life Group Ltd., Ireland’s largest pension manager and life insurance provider.

Irish Life has over one million clients and $50 billion of assets under management.

The government of Ireland nationalized Irish Life in June 2012, after its former parent company, Irish Life & Permanent, ran into financial difficulty.

Great-West will pay $1.75 billion for Irish Life when the deal closes in July 2013. To put that in context, Great-West earned $2.0 billion, or $2.06 a share, in 2012. To help pay for this purchase, Great-West will sell $1.25 billion of new common shares at $25.70 each. That will increase the number of shares outstanding by 5%.

Great-West is already Canada’s largest insurance company, with $545.8 billion in assets under administration—but big purchases like this still add risk.

However, Great-West has a long history of operating in Ireland. Moreover, the company expects to save around $52 million a year by combining Irish Life’s computer systems and offices with its own operations. These savings should help increase Great-West’s annual earnings by $215 million, starting in 2014.

Great-West Lifeco is a buy.

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