Clarica and Sun Life Financial are out defending their proposed combination.

Clarica says that its board met yesterday and has unanimously affirmed its support for the proposed transaction with Sun Life. It reiterated its recommendation that Clarica shareholders vote in favour of the transaction. Shareholders will be asked to consider the merger at a meeting to be held on March 6, 2002.

“The board has taken into consideration all views and reaction that have been expressed by Clarica shareholders to date, including the negative views of a small number of institutional shareholders that have been recently reported in the press,” it says. It warned shareholders that it is not aware of a competing bid. Some shareholders have assailed the deal because the firm did not run an auction and they call the breakup fee attached to the deal excessive.

David Ganong, chairman of Clarica, stated, “the Board continues to believe that the Sun Life Financial transaction is in the long-term best interests of Clarica and all its shareholders. The combination of Sun Life Financial and Clarica is an excellent strategic and operational fit. The combined organization will be the largest Canadian life insurance company, one of the leading publicly-traded North American life insurers and well-positioned to take advantage of Sun Life Financial’s substantial and expanding U.S. business and growing international operations.”

It says that the break fee is in keeping with other recent deals, at about 4% of the deal size.

“We are paying a full and fair price for the Clarica shares. We believe that this, together with the other benefits we bring to the transaction as structured, is the reason that Clarica has not received a competing bid. Investors take on a substantial risk in voting against this transaction,” Sun Life said. “The break fee is within the range of precedents for comparable transactions and is fair and appropriate in the circumstances.”