Dow Jones Newswires | Insurer Old Republic International Corp.
has agreed to buy PMA Capital Corp. for $228 million in stock as the
struggling insurer looks to build its general-insurance business.
Old Republic does most of its business in property and casualty coverage but has been slammed by weakness in its mortgage and general insurance operations. That unit, its biggest, saw operating profit climb 19 percent as revenue dropped 8.5 percent in the first quarter. Companywide, Old Republic unexpectedly swung to the black in the period, its first profit in more than two years.
PMA, a holding company that provides workers’ compensation and other commercial property and casualty lines of insurance and fee-based services, saw profit fall 1.5 percent in its latest reporting period as revenue was virtually flat and net premiums written rose 8.7 percent to $128.4 million.
Under the deal, Old Republic will issue 0.55 share for each share of PMA, valuing the latter at $7.10, a 16 percent premium to Wednesday’s closing price. The stock issuance may be adjusted depending on Old Republic’s stock price the day before the merger, but will not exceed 0.6 share or be less than 0.5.
The purchase, set to close in the third quarter, also includes the assumption of $137 million of debt.
Neither company’s shares were active premarket. Old Republic closed Wednesday at $12.91, while PMA finished at $6.11.
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