About two years after withdrawing a similar offer, American Financial Group Inc. is proposing to acquire all of the outstanding common shares of specialty transportation insurer National Interstate Corp. that its subsidiary, Great American Insurance Co., does not already own. AFG’s cash offer is for $30.00 per share, or about $293 million.
The $30.00 per share price represents a 32.7 percent premium over National Interstate’s last closing price.
This is AFG’s second attempt at a takeover of National Interstate. Last March, AFG withdrew a similar offer of $30 per share (which it raised from an original offer of $28) after several National Interstate shareholders objected and National Interstate’s founder, Alan Spachman, sued to block a deal on the basis that directors associated with AFG should not have been involved in negotiations, according to the Wall Street Journal.
“Our proposal represents an attractive opportunity for National Interstate’s shareholders to receive a significant premium to National Interstate’s current and recent share prices,” said Carl H. Lindner III and S. Craig Lindner, co-chief executive officers of AFG. “We would be making an additional investment in a business we know well, while at the same time simplifying the ownership structure.”
GAIC already owns approximately 51 percent of the outstanding National Interstate common shares, and current or former executive officers of GAIC or AFG currently comprise five of the 11 members of the board of directors of National Interstate.
AFG said it expects that the National Interstate board of directors will appoint a special committee to consider the proposed transaction and make a recommendation to the National Interstate board of directors. AFG expects that the special committee will retain its own independent legal and financial advisors to assist in its review of the proposed transaction.
AFG said it will not move forward with the transaction unless it is approved by a special committee assisted by independent legal and financial advisors. None of the National Interstate directors who are current or former executive officers of GAIC or AFG will participate in the consideration of the AFG proposal by National Interstate, the special committee or the special committee’s advisors, according to AFG’s announcement.
In addition, AFG said the transaction will be subject to approval of a majority of the shares of National Interstate not owned by AFG or its affiliates. All shareholders of National Interstate will receive the same consideration for their shares in the proposed transaction.
The proposed transaction will not be subject to a financing condition.
Richfield, Ohio-based National Interstate wrote $727 million in premium in 2015. It reported a combined ratio of 100.4 for full calendar year 2015 and 103.9 for 2014. Last month in reporting results CEO Dave Michelson said underwriting results are improving due to rate increases obtained since 2013 and “disciplined pricing on new business.”
In December, National Interstate announced that Anthony (Tony) J. Mercurio will succeed Michelson as CEO in June. Michelson will continue to serve on National Interstate’s board and as a senior advisor to the company. Mercurio has served as executive vice president and chief operating officer since 2013; he was named president last November.
National Interstate’s sales include insurance for transportation companies (35.6%), alternative risk transfer, or captive insurance programs, for commercial risks (54%), specialty personal lines insurance for recreational vehicle owners (5.2%), and transportation and general commercial insurance in Hawaii and Alaska (3.1%). The company offers its products through independent agents and brokers, affiliated agencies and agent Internet initiatives.
AFG said it believes that National Interstate operations represent an important strategic component of AFG’s overall operations. AFG said it has informed National Interstate that it is only interested in acquiring the remaining shares of National Interstate, and has no interest in selling any of the shares owned by GAIC in National Interstate.
AFG, an insurance holding company based in Cincinnati, Ohio, reports assets of approximately $50 billion. Through the operations of Great American Insurance Group, AFG is engaged primarily in property/casualty insurance, focusing on specialized commercial products for businesses, and in the sale of fixed and fixed-indexed annuities in the retail, financial institutions and education markets.