MetLife Inc. (MET) said it will divest essentially all its 52% stake in the Reinsurance Group of America Inc. (RGA) through a tax-free split-off to MetLife shareholders.

The insurance and financial-services giant said the move will help both companies' expansion and growth while strengthening "each company's ability to focus on developing and growing its core businesses."

RGA said the deal - expected to be completed in the third quarter - will increase the liquidity and public float of its stock by nearly doubling the number of shares publicly held and providing management "with greater flexibility in dealing with the opportunities and challenges specific to its businesses."

MetLife had previously toyed with divseting the stake in 2005, when it was considering using proceeds to partially fund its acquisition of Travelers Life & Annuity. But that time, it decided against the move after determining it had sufficient alternative means of financing the acquisition to allow it to retain the reinsurance business.

Under the terms of the latest deal, RGA's stock will be recapitalized into two classes of common stock - Class A, with the right to elect up to 20% of RGA's directors, and Class B, with the right to elect at least 80% of RGA's directors.

As a result, "substantially all" of MetLife's interest in RGA will be exchanged for the Class B stock, which will then be offered to MetLife stockholders in exchange for their MetLife shares.

In connection with the recapitalization, RGA will seek shareholder approval of a series of amendments to its articles of incorporation - including voting-power changes - and ratification of a shareholder-rights plan, an anti-takeover measure typically known as a poison pill.

RGA said it adopted measures saying shareholders can't acquire more than 5% of the value of RGA common stock, except in specified transactions, without the approval of RGA's board of directors. RGA said the plan is designed to preserve shareholder value as well as the value of certain tax assets.

But the poison pill won't apply to shares acquired in the split-off, or in any subsequent transactions related to the divestiture. Meanwhile, shareholders who own 5% or more in value of RGA as of Sunday won't trigger the plan as long as they do not acquire any additional shares.

MetLife said RGA's board has approved the deal and recommended that its shareholders back the transactions.

MetLife recently traded at $59.61, down 42 cents. RGA was down 1% at $50.91.

-----------------------------------------------------------------------------------------------

Copyright 2008 Dow Jones Newswires