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Sources say Sun Life, Khazanah to buy Aviva’s Malaysian operations Monday

Canada’s Sun Life Financial and Malaysian state investor Khazanah have agreed to buy Aviva’s Malaysian insurance joint venture with lender CIMB for about 1.7-billion ringgit ($550-million Canadian), sources said on Sunday.

Michelle Siu/The Globe and Mail

Canada's Sun Life Financial and Malaysian state investor Khazanah have agreed to buy Aviva's Malaysian insurance joint venture with lender CIMB for about 1.7-billion ringgit ($550-million Canadian), sources said on Sunday.

The deal will help the Canadian company expand its Asian footprint.

The consortium of Sun Life Financial Inc. and Khazanah Nasional Berhad edged out rival Manulife Financial Corp to win the eight-month old auction, sources familiar with the sale process said.

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Britain's No.-2 insurer Aviva is exiting marginal markets across the world with the aim of boosting its underperforming share price, and the sale of its Malaysian unit is part of that overhaul. Last month, Aviva sold its U.S. business for $1.8-billion (U.S.), its biggest-ever disposal.

The Malaysian deal is expected to be signed on Monday, the sources said.

Global insurers are showing increasing interest in Southeast Asia because of its rapid economic growth, high savings rates, and relatively young populations.

Malaysia is the third-biggest economy in the 10-member Association of Southeast Asian Nations and CIMB has 320 branches across the country through which it can sell insurance products.

Sun Life already has joint ventures with CIMB Group Holdings Bhd elsewhere in Asia.

A Sun Life spokeswoman did not offer an immediate comment. Aviva could not be reached for comment immediately. CIMB and Khazanah officials were not available for an immediate comment.

Aviva's sale of its Malaysian operations drew interest from Prudential Plc and AIA Group Ltd. AIA dropped out of the bidding last fall after making a successful bid for ING Groep NV's Malaysian operations.

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Under the deal, Sun Life will buy Aviva's 49 per cent stake in the joint venture, while Khazanah will buy CIMB's stake.

"Most of the value comes from the exclusive distribution agreement that Aviva has with CIMB," one person familiar with the matter told Reuters.

Aviva and CIMB entered into a 20-year bancassurance agreement five years ago.

As part of a business reorganisation launched last July, Aviva decided to sell or close 16 businesses that tie up over a third of the insurer's capital, while contributing just 18 per cent of operating profit.

Aviva's Malaysian operations were formed as a joint venture with CIMB in 2007. The business struggled, and Aviva announced its intention to sell its underperforming assets and boost its capital reserves and share price last summer.

Aviva recently sold its Sri Lankan operations to AIA, and named New Zealand-born Mark Wilson as its new chief executive officer.

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For the Malaysia deal, Sun Life was advised by Bank of America Merrill Lynch. Morgan Stanley advised Aviva, JPMorgan advised CIMB and Rothschild advised Khazanah.

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