Nationwide Mutual acquires Harleysville Insurance for $760 million

Nationwide will pay $60 cash for each Harleysville share, a near 100 percent premium to the stock’s Wednesday’s closing price, for about 12.6 million shares in total.

Harleysville Mutual policyholders will become Nationwide Mutual members. The merged entity will have an estimated net surplus of $13.5 billion and $16 billion in annual direct written premiums.

Nationwide’s offer price is 2.1 times Harleysville’s book value, even though the sector median is about 0.84 times book.

That’s premium valuation even at the peak of the cycle for property and casualty insurers, when analysts say they usually trade for about twice their book value.

One analyst attributed the high price to scarcity premium; Harleysville was one of the large insurers left that fits into Nationwide’s expansion plans.

“With Harleysville’s expertise in commercial lines and Nationwide’s complementary geographic distribution, there will be a substantial opportunity to increase market share, while also providing our combined agents and customers access to a broader portfolio of insurance, financial and banking products,” said Nationwide’s CEO Steve Rasmussen.

“We are proud of our 96-year history and the longstanding success we and our independent agencies have enjoyed as a result of our partnership with one another. We remain committed to our trusted independent agency partners and to the independent agency system. I am confident that the combined organization will allow us to deliver the best products and services available to grow our independent agents’ books of business with us more effectively and efficiently,” said Michael Brown, president and chief executive officer of Harleysville.

The merger will make it easy for customers and agents to do business with Nationwide, said Rasmussen. “Nationwide has invested heavily in independent agent distribution, beginning with our acquisition of Allied Insurance in 1998. While the Harleysville transactions would expand our independent agency distribution nationally, Nationwide also maintains a strong commitment to its exclusive agency partners. We’re committed to making strategic investments in all of our distribution channels as each is vital and contributes to our mission,” he added.