Liberty Mutual Group announced today it has reached an agreement to acquire Seattle-based insurer Safeco Corp. in a transaction valued at $6.2 billion.
In announcing the move, Boston-based Liberty Mutual said it will pay $68.25 per share in cash to become the fifth-largest U.S. property-casualty insurer. As of 2007, the combined 2007 direct written premium of the firms was $26.1 billion.
The proposed transaction, approved by the boards of both companies, is subject to approval by Safeco’s shareholders as well as regulators.
The transaction is expected to be closed by the end of the third quarter, the companies said. The transaction is not subject to financing contingencies.
Liberty Mutual Group is currently the sixth-largest U.S. p-c insurer, based on the company’s 2007 direct written premium of $20.2 billion, while Safeco had 2007 direct written premium of $5.9 billion.
Following the transaction, Liberty said Safeco will become part of the group’s Agency Markets business unit, which had revenues of $5.6 billion in 2007. Combined, the organization will be represented by about 15,000 independent agencies.
“The addition of Safeco significantly expands and strengthens the Liberty Mutual Group,” said Edmund F. Kelly, Liberty Mutual Group’s chairman, president and chief executive officer.
Safeco’s operations and product mix, he added, “complement our existing Agency Markets operations. Additionally, both organizations have superb surety businesses, which when combined will form the second-largest surety business in the United States.”
Paula Reynolds, Safeco’s president and CEO, called the deal an “opportunity to take West Coast inventiveness and launch it with a global brand at a substantial premium to Safeco shareholders.”
“Safeco is an excellent addition to Liberty Mutual Agency Markets, and I look forward to working with the Safeco leadership team to deliver even greater value to our independent agent partners,” commented Gary Gregg, president of Liberty Mutual Agency Markets.
The company announcement said that with revenue approaching $12 billion, Agency Markets will rank third in personal lines and fifth in commercial p-c products distributed through independent agents in the United States.
In light of the proposed transaction, Safeco said it has postponed the shareholders annual meeting it had scheduled for May 7. Safeco added that it will provide information on the timing of the annual and special shareholder meeting to approve the transaction announced today when available.
Safeco said it has been advised in the transaction by Morgan Stanley & Company Inc. and Skadden, Arps, Slate, Meagher & Flom LLP.
Agency Markets, a major business unit of the Liberty Mutual Group focusing on independent agency distribution, had $5.2 billion in net written premium in 2007 and has approximately 7,000 employees.
Liberty Mutual Group offers personal automobile, homeowners, commercial multiple peril, commercial automobile, general liability, surety, workers’ compensation, global specialty, group disability, assumed reinsurance and fire coverage
The company employs over 41,000 people in more than 900 offices throughout the world.
Safeco provides insurance for individuals and for small- and mid-sized businesses, including personal auto and homeowners, as well as coverage for small- and mid-sized businesses, and surety bonds.