Des Moines, Iowa-based Employers Mutual Casualty Co. (EMCC) and EMC Insurance Group Inc. (EMCI) have entered into a mutual agreement under which EMCC will acquire all the remaining shares of EMCI that it does not currently own for $36.00 per share in a cash transaction.
EMCC currently owns 55% EMCI’s outstanding shares. The transaction, which is expected to close in the second half of 2019, has an equity value of approximately $356 million based solely upon the outstanding shares of EMCI not owned by EMCC, the companies said.
EMCC has formed a new wholly owned subsidiary to be merged into EMCI.
The $36.00 per share purchase price represents an approximate 50% premium to the $23.99 closing market price of EMCI’s common stock on Nov. 15, 2018, the last trading day prior to the public announcement of EMCC’s original proposal to acquire 100% ownership of EMCI.
It also represents a 27% premium to EMCI’s $28.44 book value per share as of March 31, 2019, a 16% premium to EMCI’s 52-week closing high prior to the public announcement of EMCC’s original proposal and an increase of 20% over EMCC’s originally proposed purchase price of $30.00 per share.
In response to EMCC’s original proposal, the EMCI board of directors formed a special committee comprised of independent directors. Bruce G. Kelley, president, chief executive officer and a director of both EMCI and EMCC, recused himself from all of EMCI’s and EMCC’s respective discussions, considerations, recommendations and votes with respect to the proposed transaction.
The special committee reviewed EMCC’s proposal and considered other options available to EMCI. It ultimately determined that EMCC’s proposed transaction is in the best interests of EMCI and its minority shareholders and unanimously recommended the transaction to EMCI’s board, which approved the transaction (with Kelley recusing himself).
The transaction requires the receipt of “majority of the minority” shareholder approval of the transaction and provides an opportunity for EMCI’s shareholders to exercise their appraisal rights in connection with the proposed transaction.
The transaction does not provide for any termination or “break-up” fees. EMCI will file a current report on Form 8-K with the Securities and Exchange Commission (SEC), which will more fully describe the terms and conditions of the merger agreement and the proposed transaction.
The proposed transaction is subject to satisfaction or waiver of customary closing conditions, including the approval of the transaction by the holders of a majority of the outstanding shares of EMCI common stock not owned by EMCC, its affiliates and the executive officers and directors of EMCI, EMCC and their respective subsidiaries.
The transaction is not subject to a financing condition. As a result of the proposed transaction, EMCI has agreed to postpone its 2019 annual shareholders meeting.
Sandler O’Neill & Partners, L.P. is serving as financial advisor to the EMCI special committee. Boenning & Scattergood, Inc. provided financial advice to EMCC’s board.
Willkie Farr & Gallagher LLP is acting as legal counsel to the EMCI special committee. Foley & Lardner LLP is acting as legal counsel to EMCC.
EMCC was organized in 1911 to write workers’ compensation protection in Iowa. Today, operating under the trade name EMC Insurance Companies, EMCC and its subsidiaries provide property and casualty insurance products and services throughout the United States, and EMCC writes reinsurance contracts worldwide. EMCC is licensed in all 50 states and the District of Columbia
EMC Insurance Group Inc. is a publicly held insurance holding company, which was formed in 1974 and became publicly held in 1982. EMCI’s common stock trades on the Global Select Market tier of the Nasdaq Stock Market under the symbol EMCI. EMCI’s parent company is EMCC.
Source: EMCC, EMCI
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