Mercer Insurance (NASDSAQ:MIGP) surged to an all-time high Wednesday after inking a deal to be acquired by United Fire & Casualty (NASDAQ:UFCS) for $191 million in cash.
Under the terms of the deal, United Fire will acquire all the outstanding shares of Mercer for $28.25 each, representing about a 50% premium to Mercer’s closing price on Tuesday, the companies said Wednesday in a joint statement.
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United Fire, which said the acquisition widens its portfolio base and allows it to expand into new markets, plans to fund the transaction using cash on hand and bank financing.
Randy A. Ramlo, United Fire chief executive, said the company has been looking to enter the Mid-Atlantic and West Coast markets for years in an effort to diversify its risk portfolio and scale its operations.
“Mercer Insurance has a long track record of operating profitably in these markets, and we are very pleased that the company and its employees, agents and policyholders will be joining the United Fire family,” he said. “The transaction is a very attractive financial opportunity for United Fire, and we anticipate it will contribute to our net income and return on equity no later than 2012.”
The combined company will market commercial and personal insurance through some 1,400 independent agents in 24 states. The two had combined net premiums last year of $605 million.
The transaction, subject to customary closing conditions and both regulatory and Mercer shareholder approvals, is expected to close at the end of the first-quarter of 2011.
Mercer’s board of directors has approved the merger and recommended shareholders do the same. Board members and other officers and directors of Mercer, who together own about 13% of the company’s outstanding shares, have agreed to vote their shares in favor of the merger