Combined Company to Use The Chubb Name
In a deal estimated at about $28.3 billion, Zurich-based ACE Limited has announced that it will acquire The Chubb Corporation of Warren, New Jersey. According to the official announcement, the Board of Directors of both companies have unanimously approved a definitive agreement under which Ace will acquire Chubb.
“We are thrilled to announce the acquisition of Chubb, a venerable company with a great brand,” said Evan G. Greenberg, Chairman and CEO of ACE Limited. “This transaction advances our strategy in a meaningful way and represents an outstanding opportunity to create significant value over a reasonable period of time for both ACE and Chubb shareholders. We are combining two great underwriting companies that are highly complementary. We will make each other better and create a unique company in a class of its own that has greater growth and earning power than the sum of the two companies separately.”
John D. Finnegan, Chairman, President and CEO of Chubb, said, “This is a compelling transaction for all Chubb and ACE stakeholders. The combination brings together two highly respected and successful companies with complementary capabilities, assets and geographic footprints. We are confident that it will deliver strong value to Chubb shareholders, including an immediate premium and participation in the future growth and profitability of a well-positioned combined company. We are pleased that the combined company will adopt the Chubb brand and view this as an affirmation that both companies share a commitment to the attributes of quality and service the brand represents. We look forward to working together as we create a best-in-class global franchise in P&C insurance.”
According to the terms of the transaction, Chubb shareholders will receive approximately $62.93 per share in cash with another 0.6019 in shares of ACE stock. Based on the recent closing stock prices for ACE for June 30, 2015, the total value is calculated at approximately $124.13 per Chubb shaw or $28.3 billion in the aggregate.
Upon completion of the acquisition, ACE shareholders will own approximately 70 percent of the combined company, while Chubb shareholders will own the remaining 30 percent. According to the announcement the consideration “…represents an approximately 30 percent premium to Chubb’s closing price of $95.14 on June 30, 2015.”
Complementary Presence and Capabilities
One of the overriding themes of this merger is the complementary nature of each company along with the growth opportunities the newly merged company will create. “We will be well balanced with greater presence and capabilities in product areas that have less exposure to the commercial P&C cycle,” explained ACE’s Chairman & CEO Evan Greenberg. “We have complementary product strengths – where one of us is not present, the other is. Where one of us is strong, the other is even stronger. Where there is overlap in product, generally one of us is more present at the large end of the corporate market while the other is serving the smaller or mid-market segment.
Presently, ACE’s commercial lines business in the United States has focused on the industrial commercial, multinational and upper middle market companies with its product distribution primarily through brokers, while outside the U.S. it is a premier commercial insurer in over 54 countries.
In comparison, Chubb’s U.S. commercial insurance presence consists of a primarily middle-market commercial, specialty and surety offerings via a major agency presence, while in personal insurance, Chubb is a leading provider of personal lines coverage to high net worth customers throughout the U.S. Internationally, Chubb has operations in another 25 countries allowing ACE to deepen it’s global presence.
“Finally, we will benefit from each other’s complementary cultures, including a shared passion for underwriting discipline and outstanding claims service. Operating under the Chubb name, with sustained long-term underwriting profit and a larger invested asset base that will benefit from rising interest rates, we will take advantage of the growth opportunities and significant efficiencies to be gained between us. Together, we will grow more substantially and at a faster rate, producing greater earnings, than we could achieve as two separate companies. We look forward to welcoming the talented Chubb employees and their customers and distribution partners to the ACE family,” added Greenberg.