MetLife Raises $6.6B for ALICO - Analyst Blog

In an attempt to raise capital for the pending ALICO acquisition, MetLife Inc. (MET) announced earlier this month the closure of its open market stock offering worth $3.6 billion. In addition, the company also sealed the public offering of its senior debts worth $3.0 billion.

While the common stock offering consisted of 75 million shares with an additional 11.25 million shares in order to cover over-allotments, MetLife's senior debt offering consisted of multiple securities with different interest rates and maturity.

MetLife had appointed BofA Merrill Lynch of Bank of America Corp., Credit Suisse Group, Deutsche Bank Securities of Deutsche bank AG, HSBC Holdings plc, UBS Investment Bank of UBS AG and Wells Fargo Securities of Wells Fargo & Co. as its book-running managers for the two transactions.

Of late, MetLife has been seeking funds to acquire American International Group Inc.'s (AIG) American Life Insurance Co. (ALICO) unit by the end of 2010. However, in January 2010, the company had also issued notes worth $2.5 billion to fund its developmental activities.

Estimate Trend Revision

Over the last 30 days, ten of 16 analysts covering the stock have reduced their estimates for the third quarter of 2010, while four upward revisions were witnessed. Currently, the Zacks Consensus Estimate for the third quarter is operating earnings of $1.05 per share, which would be up by 20.6% from the year-ago quarter.

The higher number of downward estimate revisions for the third quarter indicates a likelihood of a negative trend in the performance of the stock in the near term.

With respect to earnings surprises, the stock has been steady over the last four quarters; it has put together four straight quarters with positive surprises. The average surprise is 7.33%. This implies that MetLife has surpassed the Zacks Consensus Estimate by 7.33% over that period.

The downside potential for the estimate in the second quarter, essentially a proxy for future earnings surprises, currently stands at 0.19%.

We believe that the solid earnings performance in the last quarter has injected further confidence in MetLife to raise money from the market, in order to meet its long term growth targets.

In addition, the pending ALICO acquisition is expected to close by the end of 2010 and will be immediately accretive to earnings, although related debt cost could mount pressure on the bottom-line for some time. While we think MetLife should continue to benefit from its diversified business mix as well as its leading brand, losses in the investment portfolio are likely to impact the results in the upcoming quarters.

 
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