By Lisa Beilfuss
ACE Ltd. agreed to buy fellow property-and-casualty insurer
Chubb Corp. for $28.3 billion in cash and stock, making the tie-up
one of the biggest deals this year.
Chubb holders will receive $62.93 in cash and 0.6019 shares of
ACE, for a total value of about $124.13 a share. The price tag
represents a 30% premium over Tuesday's closing price. Chubb shares
surged 36% to $129 in premarket trading. ACE shares jumped 12% to
$113.76.
The companies expect to complete the deal during the first
quarter of next year.
In Chubb, ACE gets one of the most well-known brand names in the
property-and-casualty insurance industry, as its Masterpiece
homeowners coverage is the choice of wealthy Americans to protect
their houses.
ACE shareholders will own 70% of the new company, which will
operate under the Chubb name globally. Evan Greenberg, the chief
executive of ACE, will lead the combined company. Chubb CEO John
Finnegan will serve as executive vice chairman for external affairs
of North America and will assist with the integration.
Mr. Greenberg appears to be following in the footsteps of his
father, Maurice R. "Hank" Greenberg, who built his own insurance
empire as the long-time chairman and chief executive of American
International Group Inc.
Evan Greenberg abruptly left AIG in 2000 as the heir apparent to
his father after a 25-year career there and joined ACE as CEO the
following year. His father, meanwhile, is currently fighting the
U.S. government over the terms of AIG's 2008 bailout.
By the third quarter post-closing, ACE said it would realize
annual expense savings of about $650 million pretax. The deal will
immediately add to earnings and book value.
Four independent directors from Chubb's board will be added to
the combined entity's board, the companies said.
Zurich-based ACE has made a series of smaller deals over the
past year, buying with a local partner bought most of
Thailand-based Siam Commercial Samaggi Insurance PCL last year,
along with a property and casualty business from Brazil's Itau
Unibanco Holding SA and certain Fireman's Fund operations from
Allianz SE.
For its part, Chubb is one of the biggest personal-lines and
business insurers in the U.S. Last year, the New Jersey company
reported a profit of $2.5 billion on $12.6 billion in sales. Its
conservative underwriting and investment approach enabled it to
weather the 2008 financial crisis with little damage to its balance
sheet.
Merger and acquisition activity has been on fire this year, as
companies gain more confidence about the economy, use stockpiles of
cash to reach for future growth and get boosts from low interest
rates and the surging stock market. Ace's bid for Chubb lands the
deal near the top of the heap, adding to the more than $2 trillion
in M&A deals or offers unveiled globally so far this year.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
Access Investor Kit for ACE Limited
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=CH0044328745
Access Investor Kit for The Chubb Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US1712321017
Subscribe to WSJ: http://online.wsj.com?mod=djnwires