JOHN DEMONT October 13 2003


JOHN DEMONT October 13 2003


Manulife’s $15-biilion bid for John Hancock will create a ‘a world-class company’



DOMINIC D’ALESSANDRO, CEO of Toronto-based Manulife Financial Corp., last week unveiled a whopping $15-billion takeover bid for Boston-based John Hancock Financial Services Inc. If the deal succeeds—it has the blessing of Hancock’s CEO, coincidentally named David D ’Alessandro—the Canadian D’Alessandro, 56, will oversee the world’s fifth-largest life insurer, and second-largest in North America. In a whirlwind week, he spoke with Katherine Macklem, Maclean’s National Business Correspondent.

You’ve struck the largest cross-border deal ever seen in Canada. How are you feeling?

I’m a little tired, actually. I’m running out of gas. But I feel good, it’s exhilarating.

In the insurance biz, is bigger better?

I don’t know that automatically follows. We’ve set out to build a world-class company that would be a leader in our industry, and this takes us a long way there.

Do you think the deal will set off a wave of consolidation in the U.S.?

In Canada, consolidation took place years ago, so we have huge banks and sizable insurance companies. In the U.S., there are still 900 or so insurance companies. Consolidation pressures are not going to abate.

Could the John Hancock deal stop you from participating in more mergers?

For the next few years it would be imprudent for us to take our eye off the ball. The first order of business is to (a) consummate this transaction and (b) integrate the two companies. It’s not a trivial undertaking.

Clarica and Canada Life were bought by two of your competitors. Your urge to merge with CIBC was apparently quashed by Ottawa. Were you under pressure to get this deal done?

I wasn’t getting any pressure from my investors. We have one of the best-performing insurance stocks in the world. Columnists can say what they wish, but people

vote with their money in the stock market.

You’re looking to cut about $350 million in costs. Where will that come from?

There are a lot of businesses that have overlap across the board, whether it’s at head office or in backroom services.

Will there be job cuts?

We’d like to keep those to a minimum.

But at senior levels, you don’t need two of everything.

What happens with Hancock’s Maritime Life and the jobs there?

We will not brutalize Halifax. It wouldn’t help us if we antagonize the Maritimers.

Manulife’s share price fell with the deal. Why?

Arbitraging activity normally puts pressure on your stock price. In addition, we’re going to issue an enormous amount of stock to U.S. investors, and the concern is that may lead to an imbalance of sellers for awhile. That’s

why we talked about buying back $3 billion of our stock, which will hopefully soak up most of the excess supply.

In the past, you’ve lamented excesses in executive compensation. Yet John Hancock’s CEO made US$22 million last year, much more than you or his U.S. peers.

That’s a little unfair. The US$22 million included certain one-time payments.

Are you satisfied that his compensation package is fair?

I don’t think it is as egregious as it is being portrayed. We are quite comfortable that the compensation issues can be dealt with.

John Hancock is a top Olympic sponsor. Will Manulife sponsor Vancouver-Whistler?

I don’t know if this merger entitles us to use the rings and be a sponsor or not.

Could Manulife end up moving its head office south of the border?

It’s not going to happen on my watch.