Great-West Life and Canada Life agree to business combination; Canada Board Approves

Combined organization to be Canada’s largest insurer

WINNIPEG AND TORONTO, Feb. 17, 2003 – Great-West Lifeco Inc. today announced it has entered into a definitive agreement with Canada Life Financial Corporation to acquire 100 per cent of the outstanding common shares of Canada Life.

The Board of Directors of Canada Life will recommend that Canada Life shareholders approve the transaction, which is valued at $44.50 per Canada Life common share, representing an aggregate transaction value of $7.3 billion.

“This strategically motivated transaction will add another well-known financial brand and a powerful new distribution channel to our group of companies,” said Raymond L. McFeetors, President and CEO of Great-West and London Life.

“As a result of this transaction, Great-West will emerge from the final stage of industry consolidation with a pre-eminent position in the Canadian life insurance industry and a significantly enhanced business in the United States,” McFeetors said. “We are bringing together outstanding companies with high caliber people who are focused on high quality service.”

David A. Nield, Chairman and CEO of Canada Life said “The Board of Canada Life is very pleased that it has been able to negotiate a friendly transaction with an outstanding Canadian company. This combination creates a winning scenario for shareholders and policyholders.”

“Canada Life has a proud history. We see great value in the brand and are committed to maintaining it,” McFeetors said. “We have great respect for the staff and management of Canada Life and look forward to working with them.”

The transaction provides Great-West with a leading market share in all key segments in Canada, driven by three complementary distribution channels with unmatched breadth and scale.

In the United States, Great-West Life & Annuity will integrate the operations of Canada Life, thereby providing more distribution opportunities and strong earnings’ accretion.

In Europe, where London Life and sister company Investors Group already operate, Great-West acquires significantly enhanced group and individual businesses in high-growth markets.

The terms of the agreement allow Canada Life shareholders to elect from one of the following alternatives (subject to pro ration) per Canada Life share:

  • $44.50 in cash (maximum cash to be paid limited to $4.4 billion)
  • 1.1849 common shares of Great-West Lifeco (maximum number of shares to be issued limited to 56.0 million)
  • 1.78 Great-West Lifeco 4.80% non-cumulative 10-year soft retractable preferred shares (maximum number of shares to be issued limited to 24.0 million)
  • 1.78 Great-West Lifeco 5.90% non-cumulative perpetual preferred shares (maximum number of shares to be issued limited to 8.0 million)
  • A combination of these alternatives, subject to pro ration and maximum amounts noted.

To support the transaction, Power Financial Corporation has committed to invest $800 million to purchase 21.302 million common shares of Lifeco from treasury via private placement. Investors Group Inc. has also agreed to invest $100 million by purchasing 2.662 million Lifeco common shares from treasury.

The transaction will be effected by way of a capital reorganization. Details will be contained in a circular to be mailed to Canada Life common shareholders shortly, and they will be asked to vote on the transaction at a meeting of shareholders. The transaction is also subject to approval by regulatory authorities (including insurance and competition) in Canada, the U.S., the U.K., Ireland, Germany and Europe, as well as in other jurisdictions where the companies operate. The transaction is expected to close in the third quarter of 2003.

Canada Life Board Approves Acquisition By Great-West Lifeco

TORONTO, Feb. 17, 2003 – Canada Life Financial Corporation (Canada Life(TM)) today announced that Great-West Lifeco Inc. (Great-West) has agreed to acquire all of Canada Life’s common shares for a combination of cash and Great-West securities valued at $44.50 per Canada Life common share. Canada Life’s Board of Directors has unanimously endorsed the transaction and is recommending that shareholders approve the transaction at an upcoming shareholders meeting.

The Great-West purchase price is 15% higher than the value of the current offer by Manulife Financial Corporation, which stands at $38.66 per Canada Life share, based on the closing common share price for each of the companies on February 14, 2003.

“Canada Life’s Board of Directors is very pleased to announce a mutually beneficial transaction with an exceptional Canadian company,” said David Nield, Chairman and Chief Executive Officer of Canada Life. “This is a winning combination. Our shareholders will be pleased that we have achieved a price greater than Manulife’s offer and our policyholders, distributors and customers will continue to enjoy the commitment to quality and service they deserve.”

“Canada Life has a proud history,” said Raymond McFeetors, Co-President and Chief Executive Officer for Great-West Lifeco Inc. “We see great value in the brand and are committed to maintaining it. We have great respect for the staff and management of Canada Life and look forward to working with them.”

Members of the media are invited to attend a press conference today, at which David Nield and Raymond McFeetors will discuss the transaction. A question and answer session will follow their remarks. The press conference is scheduled to begin at 10:00 a.m. (e.s.t.) at the News Theatre, located at 98 The Esplanade in Toronto. Registration for the session will begin at 9:45 a.m. An audio and video web cast of the press conference will also be available live over the Internet by accessing Canada Life’s web site at www.canadalife.com/investor and clicking on “Presentations”.

Teleconferencing is available toll free in North America by calling 1-800-814-3911.

The terms of the agreement allow Canada Life shareholders to elect, in respect of each Canada Life common share held, any one or a combination of:

  • $44.50 in cash;
  • 1.78 $25.00 par value 4.80% Great-West preferred shares;
  • 1.78 $25.00 par value perpetual 5.90% Great-West preferred shares;
  • 1.1849 Great-West common shares;

subject to maximum amounts and proration. The total consideration being offered to shareholders consists of approximately 60% cash, 29% common shares and 11% preferred shares.

Canada Life has agreed not to solicit further proposals for the acquisition of Canada Life, but is permitted to accept a superior proposal which is more favorable to Canada Life, subject to Great-West’s right to match and payment of a termination fee to Great-West equal to approximately 3.95% of the acquisition price.

Closing is expected to occur prior to July 31, 2003 and is subject to regulatory approval, approval of two thirds of votes cast at a meeting of Canada Life common shareholders and other customary conditions.

Later this week, Canada Life shareholders will be mailed materials detailing recent developments and a reconfirmation of Canada Life’s recommendation to reject Manulife’s unsolicited offer. They will also be mailed, in approximately a month, full details of the Great-West Life transaction and Canada Life’s reasons for recommending shareholder approval of the transaction. In the interim, shareholders are encouraged to access the “Latest Shareholder News” section of Canada Life’s web site at www.canadalife.com or call our information agent, Georgeson Shareholder, toll free at the numbers indicated below.

1-866-802-5796 (Canada & USA – English)
1-866-860-4550 (Canada & USA – French)
1-800-300-062 (Republic of Ireland)
0-800-018-3047 (United Kingdom)
416-642-7084 (Other countries, call collect)

Canada Life continues to recommend that shareholders do not tender their shares to the Manulife offer. Shareholders who may have already tendered to the Manulife offer can retrieve their shares and take advantage of the Great-West alternative by completing a withdrawal form, which is available on the Canada Life web site or from Georgeson Shareholder, who can provide assistance in completing the withdrawal.

About Great-West Lifeco

Great-West Lifeco Inc. (TSX:GWO) is a financial services holding company with interests in the life insurance, health insurance, retirement savings, and reinsurance businesses, primarily in Canada and the United States. Lifeco’s subsidiaries – The Great-West Life Assurance Company and London Life Insurance Company in Canada and Great-West Life & Annuity Insurance Company in the United States – serve the financial security needs of more than 13 million people. Lifeco and its companies have $96 billion in assets under administration. Great-West Lifeco is a member of the Power Financial Corporation group of companies.

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