The Hartford Board of Directors Unanimously Rejects Chubb’s unsolicited proposal
In response to Chubb’s unsolicited offer, The Hartford’s Board of Directors issued the following statement today (after our morning email went out):
The Hartford (NYSE: HIG) today announced that its board of directors, after consultation with its financial and legal advisors, has unanimously rejected Chubb Limited’s March 11, 2021, unsolicited proposal to acquire The Hartford and determined that entering into discussions regarding a strategic transaction would not be in the best interests of the company and its shareholders. The board reaffirmed its commitment and resolve in the continued execution of The Hartford’s strategic business plan.
Goldman Sachs & Co. LLC and Deutsche Bank are acting as The Hartford’s financial advisors. Cleary Gottlieb Steen & Hamilton LLP is acting as legal counsel to The Hartford.
How the initial offer came about
On Friday, March 18, an unsolicited offer by Chubb Limited to buy The Hartford became public. Chubb made the offer to The Hartford privately on March 11, proposing to pay The Hartford’s shareholders’ stock’s acquisition for $65.00 per share. When made, the $65.00 offer represented a premium of 26% based on its unaffected 20-day volume-weighted average share price of $51.70 as of March 10, 2021.
The offer valued The Hartford at $23.2 billion and proposed payment with a mix of cash and stock, with most of the consideration paid in cash.
On Monday, March 22, The Hartford’s shares closed at 67.29, $2.79 over Chubb’s tender offer’s per-share price.
Chubb’s bid may spur further bids from other insurers
The surge in The Hartford’s share price may reflect the possibility that other insurers may consider making bids for The Hartford if it seems that the board of directors may consider offers to sell the company.
Various analysts have speculated that other insurers such as Travelers, Berkshire Hathaway, Liberty Mutual, Travelers, or Zurich, might also consider issuing a competing offer. These analysts argue the Chubb offer undervalues The Hartford by offering 144% of its book value, where other insurance acquisitions have ranged as high as 170% of book value. At that high valuation, The Hartford’s share price would fetch almost $80.00 per share.
The Hartford’s board of directors is noncommittal about Chubb’s offer
The only response to the unsolicited offer of Chub from The Hartford’s board of directors has been the statement that they are “carefully considering the proposal with the assistance of its financial and legal advisors” and that the “The board of directors is committed to acting in the best interests of shareholders over the long term.”
The combined company could become the fifth-largest insurer in the United States
Analysts estimate that the combination of The Hartford with Chubb by 2022 would result in the merged companies producing approximately $51 billion in net premiums for that policy year. Based on the present net premium for carriers, Chubb-Hartford is the fifth-largest property-casualty insurer in the United States.
While Chubb presently focuses on commercial insurance, the combination with The Hartford would put the combined company as the eleventh largest writer of personal lines in the country.