(Reuters) - U.S. Insurer Allstate Corp ALL.N said late on Tuesday it will buy National General Holdings Corp NGHC.O for about $4 billion in cash, scaling up its auto insurance business at a time when the coronavirus has crushed traffic on roads and reduced claims.
National General’s shareholders will receive $32 per share in cash and closing dividends of $2.50 per share for each share held. This would imply a total deal value of $3.92 billion and a premium of about 69% to National General’s Tuesday close, Reuters calculations showed.
National General shares jumped 64% on Wednesday, while Allstate fell 3%.
New York-based National General lists automobile insurance as its chief business, and offers services in personal auto, recreational vehicle, motorcycle and commercial auto businesses.
Allstate, one of the largest U.S. auto insurers, said in April that it would return more than $600 million in premiums to customers as many Americans were driving about 40% to 55% less due to lockdown orders.
Allstate said the deal is expected to close in early 2021 and will add to its adjusted earnings per share and return-on-equity beginning the first year.
The deal has been approved by National General’s board, the U.S. insurer said, adding that it included a breakup fee of $132.5 million.
“It’s an opportunity for us to make a real run at the independent agent channel,” said Allstate Chief Executive Officer Tom Wilson in an interview.
Allstate sells products online and through exclusive agents, but the National General deal would make Allstate the fifth largest U.S. player in the independent agent market, Wilson said.
The deal comes as the coronavirus crisis caused asset stress among insurers in North America, with ratings agencies assessing that the adverse impact of the pandemic for insurers will take some time to manifest.
Ardea Partners was the financial adviser to Allstate, while J.P. Morgan Securities LLC advised National General.
Reporting by Shubham Kalia and Kanishka Singh in Bengaluru.; Additional reportiong by Suzanne Barlyn in Washington Crossing, Pennsylvania; Editing by Sherry Jacob-Phillips and Nick Zieminski
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