UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
x Filed by a Party other than the Registrant ¨
Check the appropriate box:
¨ Preliminary Proxy Statement
¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
¨ Definitive Proxy Statement
x Definitive Additional Materials
¨ Soliciting Material Pursuant to §240.14a-12
STANCORP FINANCIAL GROUP, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| ¨ |
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| (1) |
Title of each class of securities to which transaction applies: |
| (2) |
Aggregate number of securities to which transaction applies: |
| (3) |
Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| (4) |
Proposed maximum aggregate value of the transaction: |
| ¨ |
Fee paid previously with preliminary materials. |
| ¨ |
Check box if any part of the fee is offset as provided by Exchange Act Rule 240.0-11 and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing. |
| (1) |
Amount Previously Paid: |
| (2) |
Form, Schedule or Registration Statement No.: |
On September 21, 2015, StanCorp Financial Group, Inc., an Oregon corporation (“StanCorp” or the
“Company”), issued its Definitive Proxy Statement, (the “Proxy”) regarding a proposal that the Company’s shareholders vote to adopt the Agreement and Plan of Merger, dated as of July 23, 2015 (the “Merger
Agreement”) with Meiji Yasuda Life Insurance Company, a mutual insurance company (seimei hoken sōgo-kaisha) organized under the Laws of Japan (“Meiji Yasuda”), and MYL Investments (Delaware) Inc., a Delaware corporation
and wholly-owned subsidiary of Meiji Yasuda (“Merger Sub”), providing for the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Meiji Yasuda.
Among other things, the Proxy contained: (i) information in the “Background of the Merger” section as to (a) the Company’s retainer of Milliman, Inc. (“Milliman”) to act as the Company’s actuarial advisor and
Meiji Yasuda’s subsequent engagement of Milliman to act as its actuarial advisor, (b) Goldman, Sachs & Co. (“Goldman Sachs”) discussions with regard to other parties that could potentially be interested in a strategic
transaction involving StanCorp, (c) the Board of Director’s (“Board”) considerations of the potential advantages and disadvantages of pre-signing and post-signing market checks and (d) the results of the go-shop period;
(ii) information in the “Opinion of Goldman, Sachs & Co.” section as to the retention of Goldman Sachs and services provided; (iii) information in the “Financial Projections” section as to the
Company’s projections for fiscal year 2015-2017; and (iv) information in the “Litigation Related to the Merger” section as to putative class action lawsuits filed in the Circuit Court of the State of Oregon for the County of
Multnomah.
Except as otherwise set forth below, the information in the Proxy remains unchanged and is incorporated by reference as relevant in this
filing. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Proxy.
This filing supplements those disclosures
with the following related information:
Background of the Merger
Subsequent to Milliman’s engagement by the Company, Milliman brought to the Company’s attention that a separate team at Milliman was working with
Meiji Yasuda. Milliman explained to the Company and the Board the procedures it put in place for maintaining an information barrier between the team working for the Company and the team working for Meiji Yasuda. The Board discussed Milliman’s
role in connection with a potential transaction, its procedures for ensuring confidentiality between the two teams, its longstanding relationship with and knowledge of the Company, and its preeminence in the actuarial field, and received advice that
Milliman’s dual role is not uncommon in the insurance M&A market. Based on that discussion, the Board concluded that Milliman had appropriate confidentiality procedures in place and waived the conflict.
At the March 6, 2015 special meeting of the Board, representatives of Goldman Sachs explained that they expected broad-based interest in a strategic
transaction involving StanCorp as employee benefits was one of the areas that many traditional life insurers were looking to add domestically.
With
respect to the potential advantages and disadvantages of pre-signing and post-signing market checks, the Board discussed, among other things, tactical considerations, including the advantages and disadvantages of approaching other potential parties
to solicit additional bids. The Board discussed the potential risk of competitive harm to the Company if strategic buyers conducted due diligence pre-signing but a transaction did not occur, and the increased risk of leaks inherent in a pre-signing
market check, which could create instability among the Company’s employees and distributors.
During the go-shop period, twenty potential acquirers
were contacted in the last week of July, 2015. The potential acquirers were selected from a group suggested by Goldman Sachs, with an additional suggestion from the Board. Of the potential acquirers who responded, reasons cited for declining to
participate included a lack of strategic fit, focus on other acquisitions, and price, but the majority of potential acquirers declined without explanation.
Opinion of Goldman, Sachs & Co.
During the two
year period ended July 23, 2015, Goldman Sachs had not been engaged by the Company or Meiji Yasuda or any of their respective consolidated subsidiaries to provide financial advisory or underwriting services for which the Investment Banking
Division of Goldman Sachs had received compensation.
As part of its Selected Public Companies Analysis, Goldman Sachs also calculated the following item
with respect to each of the selected companies:
| |
• |
|
P/BV Multiple (excluding AOCI) as of March 31, 2015 |
The results of this analysis are summarized as
follows:
|
|
|
|
|
|
|
| Company |
|
|
|
P/BV
(excluding
AOCI)1 |
|
| Aflac Incorporated |
|
|
|
|
1.64x |
|
| Unum Group |
|
|
|
|
1.08 |
|
| Metlife, Inc. |
|
|
|
|
1.07 |
|
| Prudential Financial, Inc. |
|
|
|
|
1.47 |
|
| Ameriprise Financial, Inc. |
|
|
|
|
3.10 |
|
| Principal Financial Group, Inc. |
|
|
|
|
1.58 |
|
| Lincoln National Corporation |
|
|
|
|
1.18 |
|
| VOYA Financial, Inc. |
|
|
|
|
0.87 |
|
| Torchmark Corporation |
|
|
|
|
2.05 |
|
| Assurant, Inc. |
|
|
|
|
1.08 |
|
| Genworth Financial, Inc. |
|
|
|
|
0.36 |
|
| CNO Financial Group, Inc. |
|
|
|
|
0.98 |
|
| Symetra Financial Corporation |
|
|
|
|
1.19 |
|
| Primerica, Inc. |
|
|
|
|
2.05 |
|
| Fidelity & Guaranty Life |
|
|
|
|
1.09 |
|
| Kansas City Life Insurance Company |
|
|
|
|
0.68 |
|
| Manulife Financial Corporation |
|
|
|
|
1.50 |
|
| Great-West Life Assurance Company |
|
|
|
|
2.22 |
|
| Sun Life Financial, Inc. |
|
|
|
|
1.71 |
|
| 1 |
P/BV based on price per share / basic book value per share. |
Goldman Sachs also calculated (for the 10
years preceding July 17, 2015), for the Company and certain of its peers:
| |
• |
|
Historical One-Year Forward P/E multiples; and |
| |
• |
|
Historical P/BV (excluding AOCI) multiples. |
The results of these analyses are summarized as follows:
Historical One-Year Forward P/E Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average |
|
|
|
1Y |
|
|
3Y |
|
|
5Y |
|
|
10Y |
|
| StanCorp Financial Group, Inc. |
|
|
|
|
13.2x |
|
|
|
12.4x |
|
|
|
11.4x |
|
|
|
10.9x |
|
| Group Benefits / A&H Peers1 |
|
|
|
|
9.8 |
|
|
|
9.2 |
|
|
|
8.7 |
|
|
|
10.2 |
|
| Other U.S. Large Cap Peers2 |
|
|
|
|
11.9 |
|
|
|
10.9 |
|
|
|
10.1 |
|
|
|
10.4 |
|
| U.S. Mid Cap Peers3 |
|
|
|
|
12.0 |
|
|
|
11.4 |
|
|
|
10.6 |
|
|
|
10.3 |
|
| Canadian Life Insurers4 |
|
|
|
|
13.0 |
|
|
|
12.4 |
|
|
|
11.7 |
|
|
|
12.9 |
|
| 1 |
Group Benefits / A&H Peers includes Unum, Aflac |
| 2 |
Other U.S. Large Cap Peers includes MetLife, Prudential, Ameriprise, Principal, Lincoln, Voya, Torchmark. |
| 3 |
U.S. Mid Cap Peers includes Assurant, Genworth, CNO Financial, Primerica, Symetra, Fidelity and Guaranty Life, Kansas City Life. |
| 4 |
Canadian Life Insurers includes Manulife, Great-West Life, Sun Life. |
Historical P/BV (excluding AOCI) Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average |
|
|
|
1Y |
|
|
3Y |
|
|
5Y |
|
|
10Y |
|
| StanCorp Financial Group, Inc. |
|
|
|
|
1.39x |
|
|
|
1.21x |
|
|
|
1.13x |
|
|
|
1.33x |
|
| Group Benefits / A&H Peers1 |
|
|
|
|
1.34 |
|
|
|
1.38 |
|
|
|
1.42 |
|
|
|
1.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average |
|
|
|
1Y |
|
|
3Y |
|
|
5Y |
|
|
10Y |
|
| Other U.S. Large Cap Peers2 |
|
|
|
|
1.42 |
|
|
|
1.27 |
|
|
|
1.13 |
|
|
|
1.24 |
|
| U.S. Mid Cap Peers3 |
|
|
|
|
0.98 |
|
|
|
0.86 |
|
|
|
0.76 |
|
|
|
0.78 |
|
| Canadian Life Insurers4 |
|
|
|
|
1.62 |
|
|
|
1.43 |
|
|
|
1.26 |
|
|
|
1.52 |
|
| 1 |
Group Benefits / A&H Peers includes Unum, Aflac. |
| 2 |
Other U.S. Large Cap Peers includes MetLife, Prudential, Ameriprise, Principal, Lincoln, Voya, Torchmark. |
| 3 |
U.S. Mid Cap Peers includes Assurant, Genworth, CNO Financial, Primerica, Symetra, Fidelity and Guaranty Life, Kansas City Life. |
| 4 |
Canadian Life Insurers includes Manulife, Great-West Life, Sun Life. |
Goldman Sachs based the above analysis on information from Bloomberg, Capital IQ and IBES as on July 17, 2015.
With respect to Goldman Sachs’ Selected Precedent Transactions Analysis, the following table provides additional analysis of certain publicly available
information relating to the following acquisitions in the insurance and employee benefits industries involving aggregate consideration greater than $100 million:
|
|
|
|
|
|
|
|
|
|
|
|
|
| Announced |
|
Acquiror |
|
Target |
|
Price to Book
Value
(excluding
AOCI) |
|
|
Price to
LTM NOI
Multiple |
|
| 2011 |
|
Tokio Marine Holdings, Inc. |
|
Delphi Financial Group, Inc. |
|
|
1.68x |
|
|
|
13.7x |
|
| 2008 |
|
Wilton Re Holdings Ltd. |
|
HealthMarkets, Inc.’s Life Insurance Subsidiaries |
|
|
NA |
|
|
|
NA |
|
| 2007 |
|
Sun Life Financial Inc. |
|
Genworth Financial, Inc.’s U.S. Employee Benefits Group |
|
|
1.101 |
|
|
|
20.3 |
|
| 2007 |
|
Humana Inc. |
|
CompBenefits Corp. |
|
|
NA |
|
|
|
NA |
|
| 2007 |
|
Humana Inc. |
|
KMG America Corp. |
|
|
0.72 |
|
|
|
NM |
|
| 2006 |
|
Great American Financial Resources, Inc. |
|
Ceres Group, Inc. |
|
|
1.00 |
|
|
|
13.6 |
|
| 2006 |
|
HCC Insurance Holdings Inc. |
|
Allianz Life Insurance Company Health Products Division |
|
|
NA |
|
|
|
NA |
|
| 2004 |
|
Jefferson-Pilot Corp. |
|
Great-West Lifeco Inc. U.S. Group |
|
|
NA |
|
|
|
NA |
|
| 2003 |
|
The Hartford Financial Services Group, Inc. |
|
CNA Financial Corp’s Group Benefits Business |
|
|
NA |
|
|
|
10.02 |
|
| 2003 |
|
RBC Insurance |
|
Provident Life and Accident Insurance Company’s Canadian Operations |
|
|
NA |
|
|
|
NA |
|
| 2001 |
|
Fortis, Inc. (Assurant) |
|
Protective Life’s Dental Benefits Division |
|
|
NA |
|
|
|
NA |
|
| 1999 |
|
GE Financial Assurance |
|
Phoenix’s Home Life’s Group Business |
|
|
NA |
|
|
|
NA |
|
| 1999 |
|
Jefferson-Pilot Corp. |
|
Guarantee Life Companies of Omaha |
|
|
1.36 |
|
|
|
20.8 |
|
| 1999 |
|
HCC Insurance Holdings Inc. |
|
Centris Group Inc. |
|
|
1.57 |
|
|
|
NM |
|
| 1998 |
|
Investor Group |
|
CompDent Corp. |
|
|
2.283 |
|
|
|
NM |
|
| 1 |
Reflects reported price to book including structuring benefits of transaction. |
| 2 |
Based on estimated 2004 earnings per Hartford December 10, 2013 investor presentation. |
| 3 |
Breakdown of AOCI not available. |
“NA” reflects data not publicly available, and “NM”
reflects non-meaningful multiples due to negative values or P/E multiples in excess of 40x.
For each of the selected transactions, Goldman Sachs calculated and compared, based on information it obtained from SEC filings, Bloomberg LP, Wall Street
Research, SNL Financial and other publicly available sources, the announced transaction price as (i) a multiple of the target company’s last reported book value (excluding AOCI) as of the announcement date of the transaction and
(ii) a multiple of the target company’s net operating income for the most recently available 12-month period preceding each precedent transaction, which we refer to as the LTM NOI Multiple.
In Goldman Sachs’ Illustrative Dividend Discount Model Analysis, the discount rate range of 9.0% - 11.0% was derived by application of the capital asset
pricing model which requires certain company-specific inputs including the beta for the Company, as well as certain financial metrics for the United States financial markets generally. The total number of
fully diluted outstanding shares utilized by Goldman Sachs as of July 20, 2015 (as provided by the management of the Company) was based on 42.3 million common shares outstanding,
1.5 million shares related to stock options, 0.1 million shares related to restricted stock units, 0.1 million shares related to non-lapsed performance shares, 0.02 million shares related to the Company’s employee share
purchase plan, and 0.01 million shares related to director annual stock grants.
Financial Projections
With respect to the financial projections provided by StanCorp management and relied upon by Goldman Sachs for purposes of its analysis, StanCorp management
projected as follows for fiscal years 2015-2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2015 |
|
|
2016 |
|
|
2017 |
|
| |
|
(Dollars in millions) |
|
| Total Revenues |
|
$ |
2,787 |
|
|
$ |
2,892 |
|
|
$ |
3,073 |
|
| Net Income |
|
|
205 |
|
|
|
209 |
|
|
|
240 |
|
| Share Repurchases |
|
|
125 |
|
|
|
125 |
|
|
|
125 |
|
Litigation Related to the Merger
With respect to the
four putative class action lawsuits filed in the Circuit Court of the State of Oregon for the County of Multnomah (“Multnomah County Circuit Court”), captioned Shiva Stein, et al. v. StanCorp Financial Group, Inc., et al., Case
No. 15CV20372, filed July 31, 2015, Bud and Sue Frashier Family Trust, et al. v. J. Greg Ness, et al., Case No. 15CV20832, filed August 7, 2015, Grant Causton, et al. v. StanCorp Financial Group, Inc., et al., Case
No. 15CV22197, filed August 20, 2015, and Janet Shock v. StanCorp Financial Group, Inc., et al., Case No. 15CV23748 (later amended to name Hillery Scott as plaintiff), filed September 8, 2015, on October 7, 2015, the
Multnomah County Circuit Court granted an order of consolidation and appointment of co-lead counsel, consolidating the four lawsuits for all purposes under the caption In re StanCorp Financial Group, Inc. Stockholder Litigation, Case
No. 15CV20372 (the “Oregon Action”).
On November 3, 2015, the Company, each of the members of the Company’s Board, Meiji Yasuda,
and Merger Sub entered into a Memorandum of Understanding (the “MOU”) with the plaintiffs in the Oregon Action, which sets forth the parties’ agreement in principle for a settlement of the Oregon Action. As set forth in the MOU, the
Company, the members of the Company’s Board, Meiji Yasuda, and Merger Sub have agreed to the settlement solely to eliminate the burden, expense, distraction, and uncertainties inherent in further litigation, and without admitting any liability
or wrongdoing.
As part of the settlement, the Company agreed to make certain additional disclosures related to the Merger, which are set forth in this
filing. These additional disclosures should be read in conjunction with the disclosures contained in the Proxy, which in turn should be read in its entirety. As contemplated by the MOU, the release to be contained in the stipulation is in
consideration of the additional disclosures in this filing. Nothing in this filing or any stipulation of settlement shall be deemed an admission of the legal necessity or materiality of any of the disclosures set forth in this filing.
Forward-looking Statements
Statements in this filing,
and in the documents to which we refer to in this filing, that relate to future results and events are forward-looking based on the Company’s current expectations. Actual results and events in future periods may differ materially from those
expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Risks,
uncertainties and assumptions include, but are not limited to: (1) the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement; (2) the inability to complete the proposed merger
due to the failure to obtain shareholder approval for the proposed merger or the failure to satisfy other conditions to completion of the proposed merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the
consummation of the transaction; (3) risks related to
disruption of management’s attention from the Company’s ongoing business operations due to the transaction; (4) the effect of the announcement of the proposed merger on the
Company’s relationships with its distributors, operating results and business generally; and (5) the outcome of any legal proceedings that have been or may be instituted against the Company and others relating to the Merger Agreement.
Actual results may differ materially from those indicated by such forward-looking statements. In addition, the forward-looking statements represent the
Company’s views as of the date on which such statements were made. The Company anticipates that subsequent events and developments will cause its views to change. However, although the Company may elect to update these forward-looking
statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date hereof. Additional
factors that may cause results to differ materially from those described in the forward-looking statements are set forth in the Company’s Annual Report on Form 10–K for the fiscal year ended December 31, 2014, which was filed with the
Securities and Exchange Commission (“SEC”) on February 26, 2015, under the heading “Item 1A — Risk Factors,” and in subsequent reports on Forms 10–Q and 8–K filed with the SEC by the Company.
Additional Information and Where to Find It
In
connection with the proposed merger transaction, the Company filed with the SEC a Schedule 14A and furnished to the Company’s shareholders a definitive proxy statement, dated as of September 21, 2015, and other relevant documents. BEFORE
MAKING ANY VOTING DECISION, THE COMPANY’S SHAREHOLDERS ARE URGED TO READ THE PROXY STATEMENT IN ITS ENTIRETY AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED MERGER OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT
BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER AND THE PARTIES TO THE MERGER. The Company’s shareholders may obtain a free copy of documents filed with the SEC at the SEC’s website at http://www.sec.gov. In addition,
the Company’s shareholders may obtain a free copy of the Company’s filings with the SEC from the Company’s investor relations website at www.stancorpfinancial.com or by directing a request to: StanCorp Financial Group, Inc., 1100 SW
Sixth Avenue, Portland, OR 97204, Attn: Jeff Hallin, Vice President, Investor Relations and Capital Markets, (971) 321-6127, jeff.hallin@standard.com.
The directors, executive officers and certain other members of management and employees of the Company may be deemed “participants” in the
solicitation of proxies from shareholders of the Company in favor of the proposed merger. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the shareholders of the Company in
connection with the proposed merger is set forth in the proxy statement and the other relevant documents filed with the SEC. You can find information about the Company’s executive officers and directors in its Annual Report on Form 10-K filed
with the SEC on February 26, 2015 and in its definitive proxy statement filed with the SEC on Schedule 14A on September 21, 2015.
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