The Hartford has agreed to acquire all the outstanding common shares of The Navigators Group, Inc., in an all-cash transaction valued at $2.1 billion, or $70 per share.
The Board of Directors of both companies have approved the deal, but it remains subject to approval by the shareholders of Navigators and other customary closing conditions. The deal is expected to close in the first-half of 2019.
Chairman and Chief Executive Officer (CEO) of The Hartford, Christopher Swift, said: “We are excited to announce the acquisition of Navigators, which we are confident will achieve key strategic and financial objectives for The Hartford. It expands our product offerings and geographic reach, and adds tenured and proven underwriting and industry talent while strengthening our value proposition to agents and customers. We are optimistic about our combined growth opportunities and expect the acquisition to generate attractive returns.”
Stanley A. Galanski, President and CEO of Navigators, added: “This transaction will result in the realization of significant value for our stockholders. It is a testament to the caliber and dedication of our people and the strength of our underwriting culture.
“We look forward to bringing Navigators’ specialty lines capabilities to The Hartford, an organization that shares our commitment to underwriting excellence, attracting and retaining top talent, and delivering exceptional customer experiences. Joining The Hartford and leveraging the strength of its balance sheet and quality of its core commercial insurance products, we will create exciting opportunities to deliver enhanced value to our brokers and policyholders.”
Based in Stamford, Connecticut, Navigators has 22 locations across the U.S. and eight globally, and has roughly 820 employees around the world who will join The Hartford once the agreement completes.
The Founder of Navigators, as well as shares controlled by other family members, which amounts to roughly 20% of total shares outstanding, have reportedly agreed to vote in favour of the transaction.
The Hartford expects the deal to drive an attractive return over time, while resulting in an immaterial reduction in 2019 net income. Excluding deal-related costs as well as integration expenses, The Hartford expects the deal to be immediately accretive to 2019 net income.
Furthermore, for 2020, the firm expects the acquisition to be accretive to net income by $30 million to $75 million, and to core earnings by $60 million to $95 million. According to The Hartford, this is comprised of a contribution by Navigators of between $80 million and $125 million to net income, and $110 million to $145 million to core earnings. Although, this is offset by a reduction of roughly $50 million in The Hartford’s net investment income, after tax, due to the cash used to fund the deal.
President of The Hartford, Doug Elliot, commented: “This transaction combines two organizations with disciplined underwriting cultures and a shared commitment to innovation, financial performance, and attracting and retaining top talent.
“Together, we will leverage a more complete product and service offering through a best-in-class distribution network enabled by our combined underwriting, claim capabilities and risk engineering, and enhanced by The Hartford’s strong brand.”
The agreement also includes a “go-shop” provision that is designed to afford an opportunity for other potential acquirers to decide if they are interested in proposing to takeover Navigators.