ZURICH Swiss insurer Helvetia (HELN.S) is to buy rival Nationale Suisse NATN.S in a deal worth 1.4 billion Swiss francs ($1.57 billion).
Helvetia, Switzerland's third largest insurer by gross premiums, will offer 80 Swiss francs per Nationale Suisse share, representing a premium of 26 percent to Friday's closing price, the insurer said on Monday.
Helvetia, which sells life and property and casualty insurance, is already the second-largest shareholder in Basel-based National Suisse with an 18.7 percent stake.
Nationale Suisse's board of directors recommended that their shareholders, which include Swiss Mobiliar and insurer Baloise BALN.VX, accept the offer.
Helvetia's offer is made up of 52 francs per share in cash plus an equity component, which will create up to 1.22 million new Helvetia shares in total, the insurer said.
National Suisse shares rose 24.8 percent to 79.25 Swiss francs per share by 0850 GMT. Helvetia's share were down by 0.7 percent to 408.75 Swiss francs per share.
The combined group will have estimated annual profits of more than 500 million Swiss francs ($560 million) and premiums of 9 billion, Helvetia said.
Nationale Suisse, which employs around 1,900 people, has 20 subsidiaries and branches in markets across Europe as well as in Asia and Latin America.
"Even though today's transaction makes sense from a strategic point of view, reinforcing the cash-generative Swiss non-life market and strengthening Helvetia's focus on selected foreign niches ... the price to be paid appears to be rather on the expensive side above the one paid for Winterthur when acquired by Axa in 2006," analysts at J. Safra Sarasin said in a note to clients.
Helvetia said the deal would allow for annual cost savings of 100 million to 200 million Swiss francs. The transaction is expected to close in the second half of 2014 subject to shareholder and regulatory approval.
($1 = 0.8944 Swiss Francs)
(Reporting by Alice Baghdjian; Editing by Edwina Gibbs and Jane Merriman)