3rd Jul 2025 09:38
(Alliance News) - Chesnara PLC on Thursday launched a rights issue of new shares to raise funds for an acquisition from HSBC Holdings PLC, in a deal that Chesnara expects to catapult it into the FTSE 250 index.
Chesnara is a Preston, England-based life and pensions consolidator that operates in Sweden and the Netherlands as well. It said it has agreed to acquire specialist life protection and investment bond provider HSBC Life UK Ltd from HSBC Bank PLC, part of London-based HSBC Holdings, for a total of GBP260 million.
The purchase will be funded by GBP55 million in existing cash resources, a GBP65 million drawdown from Chesnara's GBP150 million revolving credit facility, and a rights issue of new shares at 176 pence per share to raise up to around GBP140 million. Shareholders will be offered the right to buy 10 new shares for every 19 already held.
Despite the rights price being 40% below Chesnara's market price, its shares were stable early Thursday in London, priced at 291.18p, down 0.8%. The company has a GBP440.0 million market capitalisation.
HSBC shares were down 0.4% at 881.70p for a GBP153.97 billion market cap.
The purchase is expected to complete in early 2026, subject to regulatory approvals.
Chesnara expects the deal to enable an increase in its dividend trajectory, with the final dividend for 2025 and the interim dividend for 2026 expected to be increased by 6%. This stands against Chesnara's prior 3% annual increases.
Chesnara paid a final dividend of 16.1p per share for 2024, up 3.2% from 15.6p in 2023. This brought its total payout for 2024 to 24.7p, up 2.9% from 24.0p.
Around GBP140 million in cash generation is anticipated during the first five years of the acquisition, with further "significant" cash generation anticipated "in future years", Chesnara said.
The acquisition and expanded equity is expected to result in Chesnara's inclusion in the FTSE 250 index, the company said.
"The proposed acquisition of HSBC Life (UK) represents a material step up in scale for Chesnara group," Chief Executive Officer Steve Murray said. "HSBC Life (UK) is a high-quality business operating in products that we know well and is capable, under our ownership, of generating substantial cash flows for many years.
"This highly accretive transaction will allow us to build on our strong, 20-year track record of uninterrupted dividend growth."
By Tom Waite, Alliance News editor
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ChesnaraHSBC Holdings