TORONTO — Manulife Financial has encountered a reluctant bride in its $6.4-billion bid for Canada Life Financial, announced Monday -- the second blockbuster deal in Canada's insurance industry in a year.

A successful marriage would create the fourth-largest insurance company in North America, as well as Canada's largest.

"This will give us the size to expand everywhere more quickly" and "become a global company with a home base in Canada," Dominic D'Alessandro, chief executive of Manulife, told a news conference.

But the deal is far from done. Canada Life rejected the bid and analysts suggested Manulife is just trying to get bigger without looking for a good fit, strategically.

After failed merger talks late last week, Manulife said Monday it is offering $40 in cash or 1.055 Manulife shares for each Canada Life common share -- an offer Canada Life rejected as too low over the weekend and again publicly on Monday.

If successful, it would be the second major merger in the Canadian insurance industry in the last year after changes to federal financial services regulations made it easier for financial companies to combine.

While most observers have been waiting for Canada's big banks to merge, it's the insurance companies that have joined hands first. Earlier this year, Sun Life Financial Services of Canada acquired Clarica Life in a deal valued at more than $7 billion.

Federal Finance Minister John Manley said Manulife's proposal will need government approval, but he couldn't say yet whether it's a good deal.

A combined Manulife and Canada Life would surpass Sun Life, D'Alessandro said.

It would also lead to about 1,200 job cuts -- through attrition, not layoffs -- as operations are integrated over a two-year period, bringing in savings of about $200 million, D'Alessandro said at Manulife's Toronto headquarters.

Manulife has about 33,000 employees around the world, which includes a corporate workforce of about 12,200 and thousands of sales agents, many of which are at the company's Asian operations. Canada Life employs about 6,500 worldwide, including 4,000 in this country.

Earlier, D'Alessandro told a conference call the unsolicited $40-a-share offer is a 30 per cent premium over the average price of Canada Life's shares over the last 20 days and "reflects a full and fair value" for the Toronto-based company. D'Alessandro also said Manulife isn't planning to boost its bid.

D'Alessandro said he met Friday with David Nield, chairman and CEO of Canada Life, to propose $38 a share but that was rejected, as was a subsequent $40-a-share bid.

In a release Monday, Nield criticized the Manulife bid and said Canada Life's board has formed a special committee to review alternatives.

"In my view, this proposal does not reflect the value of our company," Nield said. "We and our professional advisers are reviewing our strategic options."

"(Nield's) view is that his company is worth considerably more _ how much more I wasn't able to get out of him," D'Alessandro said. "It's worth as much as the market is willing to bear."

Shareholders pushed Canada Life (TSX:CL) shares up more than 28 per cent Monday in heavy trading of nearly 15 million shares. The stock soared $9.05 to $40.50 _ above Manulife's offer, suggesting investors think a rival bid may be coming. At one point the stock was trading as high as $42.

Conversely, Manulife stock (TSX:MFC) fell $2.50 to $35.40.

After the markets closed, Standard & Poor's Ratings Services said it was issuing a credit watch _ with negative implications _ on debt held by Canada Life and its subsidiaries. S&P cited the uncertainty of the Manulife offer and its "significant distraction" for senior management.

D'Alessandro dismissed the runup in Canada Life's stock, saying it was fuelled by speculators. But he expects Canada Life and its bankers "will be kicking the tires and inviting others to see if there are possible offers in the marketplace."

The combined company would have total managed assets of $191.9 billion, as of Sept. 30, and would have major operations in Canada, the United States, Asia and Europe.

The bid came now because the relative valuation of Canada Life to Manulife recently got more affordable and "that triggered it for Manulife," which has wanted to make an acquisition in Canada for some time, said Mario Mendonca, an analyst with CIBC World Markets.

Canada Life stock had closed Friday at $31.45, giving the insurer a stock-market value of just over $5 billion, compared with $17.6 billion for Manulife.

While the deal would give Manulife a bigger base to build further into international markets, "I don't think that Manulife can really look at Canada Life and say, `Wow, what a perfect fit.' It's by no means a good fit," Mendonca said.

On the conference call, analysts questioned the reasoning behind the deal since Canada Life has bought up some operations in the U.K. and the U.S. from Manulife.

As for competing bidders, the list is short, Mendonca said.

Winnipeg-based insurance giant Great-West Lifeco, part of the Power Financial Group of companies, is a possibility. But Mendonca said GWL's operations are mainly in Canada and the U.S., and it hasn't wanted to get into many foreign markets.

GWL's last major acquisition was in the mid-1990s, when it outbid Royal Bank for London Life Insurance Group.

But Great-West is "always a factor," D'Alessandro said. "I think it's always speculated that they're eager to acquire businesses."