Farm Bureau Property & Casualty Insurance Co. has submitted a proposal to FBL Financial Group Inc. (FFG) to purchase all outstanding shares of Class A and Class B common stock currently not owned by Farm Bureau Property & Casualty or the Iowa Farm Bureau Federation for a cash purchase price of $47 per share, the companies announced today. 

According to a news release, the Iowa Farm Bureau Federation owns about 60% of the company’s Class A common stock, and about 67% of its Class B common stock. The aggregate cash purchase price would be about $440 million. 

In a letter dated today to FFG Vice Chairman Paul Larson, the Farm Bureau Property & Casualty board of directors wrote that the $47 per share price represents a 26.2% premium over the last closing price of FFG’s Class A common stock and a 25.6% premium to the stock’s 30-day average price, and a 29.3% premium to the stock’s 60-day average price.

“We expect that the FFG board of directors will appoint a special committee  … of non-management directors not affiliated with IFBF or FBPCIC to consider our proposed transaction and make a recommendation to the entire FFG board of directors,” the letter stated.

According to the letter, a newly formed subsidiary called Newco would be created to purchase the publicly held shares of FFG, with Newco being the surviving entity of a merger between Newco and FFG. The Iowa Farm Bureau Federation would not receive cash for its shares of FFG, but instead receive shares in Newco, the letter states.

Upon completion of the merger, all Class A and Class B common stocks would be converted into a single class common stock in Newco. 

The Farm Bureau Property & Casualty board wrote that it has no intention of making any substantive changes as a result of the proposed transaction.

“Given our longstanding knowledge of FFG and our familiarity with its operations, we are in a position to complete the transaction in an expedited manner and to promptly enter into discussions regarding a merger agreement with the special committee and its advisors providing for the acquisition of the publicly-held FFG shares,” the letter states. “We intend that, following completion of the proposed transaction, FFG’s business will continue to be run in a manner that is generally consistent with its current operations, while enjoying the operational benefits and cost savings inherent in FFG no longer being a public company. We do not currently contemplate making any material changes in FFG’s strategic or operating philosophy, or to its business.”

The Farm Bureau Property & Casualty board also wrote that the proposal is “an attractive opportunity for FFG’s public shareholders to receive a meaningful premium to the company’s current and recent share prices, and an attractive opportunity for FFG to capture meaningful cost savings through going private.”

FFG stock was trading at $49 per share at midafternoon today on the New York Stock Exchange, up $11.66.

A copy of the full news release and letter can be found here.