U.S. primary insurance giant, The Allstate Corporation, has reached an agreement to acquire National General Holdings Corporation for around $4 billion in cash, or $34.50 per share.
The acquisition, which remains subject to regulatory approvals and other customary closing conditions, sees Allstate expand its personal lines market position.
National General offers a wide range of property-liability solutions through independent agents with a significant presence in non-standard auto insurance. Additionally, National General has attractive Accident and Health and Lender-Placed Insurance operations.
In 2019, National General’s gross written premiums totalled $5.6 billion, generating income of $319 million for the year.
Tom Wilson, Chair, President, and Chief Executive Officer (CEO) of Allstate, commented: “Acquiring National General accelerates Allstate’s strategy to increase market share in personal property-liability and significantly expands our independent agent distribution.
“The acquisition increases personal lines premiums by $4.0 billion and market share by over 1 percentage point to 10%. National General’s business and technology platforms will be utilized 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.”
Under the terms of the transaction, National General shareholders will receive $32 per share in cash from Allstate, plus closing dividends expected to be $2.50 per share. Allstate is set to fund the share purchase by deploying $2.2 billion in combined cash resources and, subject to market conditions, issuing $1.5 billion of new senior debt. Allstate says that it expects to maintain its current share repurchase programme, regardless of the deal.
The Board of Directors at National General have approved the deal, including customary terms and conditions, and also including a breakup fee of $132.5 million. Reportedly, a voting agreement has been signed with entities controlling 40% of National General’s common shares to vote for the deal.
National General’s Co-Chairman and CEO, Barry Karfunkel, said: “National General’s operating expertise has enabled us to serve customers and independent agents well as we have grown both organically and through acquisition.
“We are excited about combining our team’s expertise and commitment with Allstate to become a top-five personal lines carrier for independent agents while offering a broader array of products. National General’s shareholders are also benefiting by unlocking the value created over the last decade.”
John Phelan, Managing Partner and Co-Founder of MSD Capital, which owns roughly 7.4% of National General’s outstanding common shares, said: “As proud shareholders since 2013, we support the decision of National General’s board of directors to move forward with this strategic transaction.”
Dan Bitar, a Managing Director of MSD Capital, added, “We believe the transaction is allowing National General’s employees, customers and shareholders to benefit from the significant franchise value created by the management team over the last decade.”