Penn Millers Holding Corp., which provides property and casualty insurance through its wholly owned subsidiary, Penn Millers Insurance Co., has agreed to be acquired by a subsidiary of ACE Limited for $20.50 per share in cash.
The purchase price represents a premium of 39 percent over the $14.75 per share closing price of PMIC on August 15, 2011, the date the insurer revealed that it was reviewing strategic alternatives. The price reflects approximately 101 percent of book value (108 percent of fully diluted book value) of Penn Millers at June 30, 2011 and 205 percent of PMIC’s IPO price of $10.00 per share on Oct. 18, 2009.
Douglas A. Gaudet, president and CEO of Penn Millers, said the company believes ACE’s national platform and product capabilities will provide strong growth opportunities for its agency network.
The company said that ACE plans to maintain its Wilkes-Barre, Penn. location.
The board of directors of Penn Millers has unanimously approved the proposed merger for submission via a proxy statement to Penn Millers’ shareholders. The transaction is subject to customary closing conditions.
There is no financing condition and the purchase price will be made with ACE’s available cash. The transaction is expected to close by the end of first quarter 2012.
Penn Millers sells agribusiness insurance and commercial lines insurance in 34 states. Penn Millers specializes in writing coverage for manufacturers, processors, and distributors of products for the agricultural industry.
Like other insurers, Penn Miller has been challenged by catastrophes in 2010 and the first half of 2011 and by soft pricing in commercial lines.
The company has moved to drop business that is not profitable while also seeking rate increases.
“Growth in the current soft market is difficult, so our focus on profitability limits growth opportunities,” CEO Gaudet said in his 2010 annual report. The company did manage to grow its agribusiness writings in 2010.
In 2009, Penn Miller sold its subsidiary Eastern Insurance Group, and in 2008, it sold its Penn Software and Technology Services, Inc. , which provided information technology consulting for small businesses.
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