Earlier today, insurance giant AEGON NV agreed to accept €3 billion from the Dutch government, becoming the Netherlands' second financial services company in two weeks to receive government support. Early last week, ING Groep NV received a €10 billion equity infusion from the Dutch government. These recent government injections of capital are part of the Dutch Government's support plan which set aside €20 billion of new capital “to each financial enterprise in the Netherlands that is fundamentally sound and viable.”
Unlike the U.S. Treasury Capital Purchase Program and other recent international government led capital purchase programs, including the recent ING Groep transaction, where the government in question has taken an equity stake in the institution, the Dutch government is providing capital to AEGON in the form of a loan to AEGON's largest shareholder Association AEGON, which owns approximately 34% of the company's existing voting rights through common and preference shares. In turn, Association AEGON will downstream that capital to AEGON by purchasing from AEGON 750 million non-voting securities at €4 per security, ranking pari passu with AEGON's common shares. Before October 10, 2009, AEGON has the right to repurchase 250 million of the securities between €4 and €4.52 depending on AEGON's share price and the date of repurchase, and after such date at €6 per security. AEGON may at any time repurchase the remaining 500 million of securities at €6 per security. Alternatively, after three years, AEGON may choose to convert the securities into common shares on a one-for-one basis, at which point the Dutch government may opt for repayment of the loan either in cash or in shares. As the holder of the non-voting securities, Association AEGON will receive either an annual coupon of €.34 per security (8.5%) or, if higher, an amount linked to the value of the dividend paid on AEGON common shares, fixed at 110% for 2009, rising to 120% for 2010 and 125% for 2011 and beyond. Association AEGON will use the income from the non-voting securities to service the €3 billion loan from the Dutch government.
AEGON CEO Alex Wynaendts stated that the agreement will "strengthen AEGON's position during this period of uncertainty and unprecedented economic turmoil." The structure of the Dutch government's capital injection will "ensure there is no change to AEGON's overall ownership structure and will avoid dilution of existing shareholders." Furthermore, according to a company press release, the structure "provides AEGON with security in the event that markets deteriorate significantly and flexibility to avoid excessive overcapitalization in the event the markets stabilize." AEGON has also decided to forego the final dividend for 2008.
As part of the arrangement, AEGON has also agreed to allow the government to nominate two representatives to AEGON's Supervisory Board who will also serve on AEGON's Audit, Compensation and Nominating Committees