Nationwide Financial OKs $2.4 billion buyout by parent

By Jonathan Stempel

NEW YORK (Reuters) - Nationwide Financial Services Inc NFS.N, a provider of life insurance and annuity products, on Wednesday said it agreed to a $2.4 billion buyout by its parent, Nationwide Mutual Insurance Co.

The parent agreed to pay $52.25 per share for Nationwide Financial's Class A shares, roughly 11 percent above the $47.20 per share it offered on March 10 when it first proposed the transaction. The higher price also represents a 38 percent premium over Nationwide Financial's share price in March.

Both companies are based in Columbus, Ohio. The transaction is expected to close in late 2008 or early 2009, the companies said.

"This is really about growth," said Mark Thresher, president and chief operating officer of Nationwide Financial, in an interview. "It has been somewhat more difficult to focus on customers by having separate shareholders, businesses and legal entities. It will become more efficient to deploy capital to businesses that provide customers with greater value, and higher returns for us."

Nationwide Mutual owns all Nationwide Financial Class B shares, giving it a 66.3 percent equity stake and 95.2 percent voting control. Thresher said Nationwide Mutual owns none of the Class A shares.

The market value of Nationwide Financial, including Class A and Class B shares, was roughly $6.4 billion as of Wednesday's close based on reported shares outstanding, Reuters data show.

A mutual insurance company is owned by policyholders, and returns some profit to them as dividends.

Nationwide Mutual said it has more than $161 billion of assets.

The company ranked 108th on Fortune magazine's most recent list of the largest U.S. companies. Several other companies with insurance operations and a mutual structure ranked higher, led by State Farm Insurance Cos.

Separately, Nationwide Financial said second-quarter profit fell 57 percent to $85.4 million, or 62 cents per share, from $197.3 million, or $1.37, a year earlier, hurt by investment losses.

Goldman Sachs & Co, UBS Investment Bank and the law firm Jones Day advised Nationwide Mutual on the transaction. The law firm Dewey & LeBoeuf LLP advised Nationwide Financial. Lazard and the law firm Sidley Austin LLP advised a special committee of Nationwide Financial's board.

Shares of Nationwide Financial closed Wednesday down $1.25 at $46.45 on the New York Stock Exchange.

(Editing by Carol Bishopric)