EMC board approves $356M merger to take D.M. insurer private
Employers Mutual Casualty Co. and EMC Insurance Group Inc. today announced they have entered into a definitive merger agreement that will transition the Des Moines-based property-casualty insurer from a publicly held stock company to a private company.
The transaction, which is valued at approximately $356 million, calls for Employers Mutual Casualty Co. (EMCC) to acquire all the remaining shares of EMC Insurance Group Inc. (EMCI) that it does not already own, subject to approval by a majority of the minority shareholders. EMCC currently owns about 55 percent of EMCI’s outstanding shares. To effect the transaction, EMCC formed a new wholly owned subsidiary to be merged into EMCI.
EMCI has been a publicly traded company since 1982.
A special committee formed by EMCI’s board unanimously recommended the transaction to the board, which approved it. Bruce Kelley, president, CEO and a director of both EMCI and EMCC, recused himself from all discussions and the vote.
“We believe this transaction will drive enhanced value for our organization and our policyholders,” David Proctor, chairman of EMCC’s board of directors, said in a statement. “The resulting simplified ownership structure will eliminate the divergent corporate financial and operational expectations of multiple stakeholders and allow us to focus solely on serving the best interests of our policyholders.”
Proctor said the transaction will also “eliminate the costs and regulatory burdens of maintaining a publicly traded company and provide us with increased financial flexibility to more effectively deliver enhanced value for our policyholders.” The company fully expects to retain its current “A” rating from A.M. Best after the completion of the transaction, he said.
The $36 per share purchase price represents an approximately 50% premium to the $23.99 closing market price of EMCI’s common stock on Nov. 15, the last trading day prior to the public announcement of EMCC’s original proposal to acquire 100% ownership of EMCI, the company said. EMCC originally proposed a purchase price of $30 per share.
The proposed transaction is anticipated to close in the second half of 2019, subject to satisfaction or waiver of customary closing conditions.
In a separate announcement this morning, EMCI reported first-quarter net income of $33.5 million, or $1.55 per share, for quarter ended March 31, compared with a net loss of $76,000, or zero dollars per share, for the first quarter of 2018.