Cedar Rapids-based United Fire & Casualty Co. will acquire Mercer Insurance Group Inc., a New Jersey-based company, in a deal valued at about $191 million, the companies announced on Tuesday. 

Under the terms of the merger agreement, United Fire will acquire all of the outstanding shares of Mercer Insurance common stock in a transaction expected to close at the end of the first quarter of 2011. Combined 2009 net written premiums for the two companies were $605 million. Both United Fire and Mercer Insurance are rated A (Excellent) by A.M. Best Co.

Mercer Insurance shareholders will receive $28.25 per share in cash. The price represents a premium of 49.8 percent to the closing price of Mercer’s common stock on Nov. 30. United Fire said it expects to finance the transaction with a combination of available cash and bank financing.

“United Fire has been looking to enter the Mid-Atlantic and West Coast markets for years because of the potential to diversify our risk profile and increase the scale of our operations,” Randy Ramlo, president and CEO of United Fire, said in a press release. “The transaction is a very attractive financial opportunity for United Fire, and we anticipate it will contribute to our net income and return on equity no later than 2012.”

United Fire reported net written premiums of $324 million and net income of $38.4 million, or $1.46 per share, for the nine months ended Sept. 30. For the same period, Mercer Insurance reported net written premiums of $101 million and net income of $11.1 million, or $1.73 per share. The combined company is expected to be a top 50 U.S. publicly traded property casualty writer, based on 2009 net written premiums.

The board of directors of Mercer Insurance unanimously approved the merger and determined it is in the best interest of the company and its shareholders. The board also resolved to recommend that Mercer Insurance’s shareholders vote to approve the merger.