One of the country's largest home and auto insurers, Nationwide said it will pay $60 a share in cash for Harleysville, which represents close to a 100-percent premium to the stock's Wednesday close and nearly a 140-percent premium to the stock's price before rumors of a deal hit the market last week.
Nationwide spokesperson Eric Hardgrave told INN that the figure of $760 million is "the agreed-upon figure at this time, based on 12.6 million public shares at $60 each. This amount could increase to $840 million when you factor for outstanding stock options and restricted shares," he said.
Harleysville Mutual policyholders will become customers of Nationwide Mutual. The Harleysville brand will continue to exist after the deal closes, the companies said in announcing the deal on Thursday.
Closing is expected in early 2012, said Nationwide. Harleysville Mutual, the parent of Harleysville Group, reportedly committed to voting its 54 percent stake in favor of the deal, ensuring its approval.
"This combination brings together two best-in-class companies that share a mutual heritage and a focus on meeting the long-term needs of our policyholders," said Nationwide CEO Steve Rasmussen. "With Harleysville's expertise in commercial lines and Nationwide's complementary geographic distribution, there will be a substantial opportunity to increase market share, while also providing our combined agents and customers access to a broader portfolio of insurance, financial and banking products."
Earlier this week, rumors of the possible merger led some industry experts to muse that Harleysville’s independent agent channel would be in a state of upheaval. Michael Browne, president and CEO of Harleysville, issued a statement specifically noting his company’s ongoing commitment to its independent agents. “We are proud of our 96-year history and the longstanding success we and our independent agencies have enjoyed as a result of our partnership with one another,” he said. “We remain committed to our trusted independent agency partners and to the independent agency system. I am confident that the combined organization will allow us to deliver the best products and services available to grow our independent agents' books of business with us more effectively and efficiently.”
Rasmussen added, "This transaction supports and accelerates our strategy and mission to make it easy for agents and customers to do business with Nationwide however they desire. Nationwide has invested heavily in independent agent distribution, beginning with our acquisition of Allied Insurance in 1998. While the Harleysville transactions would expand our independent agency distribution nationally, Nationwide also maintains a strong commitment to its exclusive agency partners. We're committed to making strategic investments in all of our distribution channels as each is vital and contributes to our mission."
Bank of America Merrill Lynch and Jones Day advised Nationwide, while Credit Suisse advised Harleysville Mutual and KBW advised Harleysville Group.
