Credit Suisse 11:27 AM EDT, 10/04/2021 (MT Newswires) -- Credit Suisse has kept its Outperform and $72 TP on Sun Life Financial after the lifeco announced a US$2.475 billion acquisition of US-based DentaQuest.
DentaQuest is the second largest national provider of dental benefits in the U.S. market with roughly 33 million total members with a focus on the fast-growing U.S. Government Programs space (revenue CAGR of ~14% since 2018). The acquisition, which is expected to close in the first half of 2022, will more than double SLF's US Employee Benefits business, Credit Suisse writes.
The addition of DentaQuest is expected to be immediately accretive to the bottom line, adding ~C$0.17 to EPS in F2022 (roughly +2.5% based on current FactSet consensus), and C$0.24/share by 2024 with the help of ~US$60 million in annual pre-tax synergies. Further, ROE accretion is anticipated to be 42 bps and 50 bps in 2022 and 2024, respectively, which adds to SLF's already group-high ROE among the large Canadian lifecos that CS covers (consensus ROE for SLF is 15.0% for 2022). Transaction and integration costs related to the deal are expected to fall in the US$250 million range (pre-tax), while the PE multiple on a fully synergized basis looks reasonable at ~13.7x, CS said.
(MT Newswires covers equity, commodity and economic research from major banks and research firms in North America, Asia and Europe. Research providers may contact us here: https://www.mtnewswires.com/contact-us)
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