$11 billion purchase of John Hancock
is likely to roil the insurance industry, the deal's impact on the mutual fund industry is likely to be slight over the near term.
The stock-based deal was announced Sunday and will effectively fold John Hancock into Manulife Financial creating the second largest insurer in the United States when it is completed early in 2004. John Hancock will retain its brand in the United States and continue to operate as a separate division. The Manulife brand will be used in Canada and Asia, according to company officials. Indeed, the top executives of both companies see the deal creating a distribution powerhouse.
The deal will also put Hancock CEO David D'Alessandro
into the number two spot at Manulife behind Dominic D'Alessandro
and make him Manulife's chief operating officer. David D'Alessandro gets a payout of $22 million in Manulife stock that will vest over the next five years.
"These companies fit hand and glove," explained David D'Alessandro in a conference in which he explained the deal. He noted that Manulife has no real presence in the U.S. mutual fund market but does have a strong presence in the 529 college savings market. "Our sales force cannot wait to get their hands on it [the Manulife 529]," said D'Allesandro.
On the distribution front, Manulife brings strong tie-ins in the broker-dealer channel while Hancock has strong distribution in the fixed annuity and bank channels, said David D'Alessandro.
The plan, according to both D'Alessandro's, is to marry those two sets of distribution strengths to pump products from both firms throughout North America and Asia.
However, neither firm is a household name in the mutual fund business. Manulife's products are mostly limited to the Canadian market (it primarily sells annuities in the United States). Hancock has shifted course with its John Hancock Funds in recent years by cutting deals to "adopt" strongly-performing funds from advisors who lack distribution capabilities of their own rather than develop its own products internally.
The specific fate of the Hancock Funds unit and its top executives was not discussed during the analyst conference and a Hancock spokesperson was unable to immediately comment on plans for the unit. Maureen Ford is the president and CEO of John Hancock Fund while Keith Hartstein is senior vice president for retail sales and marketing.
The D'Alessandro's said that they do not expect layoffs as part of the fallout of the deal since the two firms have very few overlapping products and capabilities.
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