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Allstate to acquire National General in USD 4bn deal
Posted on Wednesday, 08 July 2020 10:06
Insurance company Allstate has reached an agreement to pick up rival National General Holdings for USD 4.00 billion in a bid to expand its car cover operations.
The coronavirus pandemic has resulted in less road traffic and therefore reduced the number of claims coming in.
Under the terms of the transaction, Allstate is paying USD 34.50 in cash per item of stock held in National General, representing a 65.1 per cent premium to the target’s close of USD 20.90 on 6th July 2020, the last trading day prior to the announcement.
Shares in the company declined 2.3 per cent to USD 20.04 yesterday, giving the group a market capitalisation of USD 2.32 billion.
Completion is slated for early 2021 and remains subject to the usual raft of conditions, including regulatory approvals.
National General shareholders will receive USD 32.00 per share in cash from Allstate, plus closing dividends expected to be USD 2.50 apiece.
The buyer will fund the acquisition by deploying USD 2.20 billion in combined cash resources and issuing USD 1.50 billion of new senior debt.
Chief executive of Allstate, Tom Wilson, said: “The acquisition increases personal lines premiums by USD 4.00 billion and market share by over 1.0 percentage point to 10.0 per cent.
“National General’s business and technology platforms will be utilised to further strengthen Allstate’s existing independent agent businesses. The transaction will be accretive to adjusted net income earnings per share and return on equity beginning in the first year.”
Headquartered in New York, National General is a speciality personal lines insurance holding company serving a wide range of customers through a network of around 42,300 independent agents for property-casualty products.
The company said automotive protection accounts for around 60.0 per cent of gross written premiums, totalling USD 5.60 billion in 2019.
National General earns attractive margins and generated operating return on average equity in excess of 16.0 per cent in 2019, with net income of USD 314.00 million, up 79.0 per cent from the prior year.
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