German reinsurance company Munich Re will buy speciality insurance company Midland Co for $1.3 billion as part of its drive to boost profitability in the United States. The world's second-biggest reinsurer said on Wednesday it would pay $65 per share for Midland, a 13.5 percent premium over Midland's closing price of $57.27 on October 16.
Munich Re is financing the deal from its own funds and said the take-over would not affect plans to return over 8 billion euros ($11.35 billion) in capital to shareholders through 2010. "Establishing and building on a leading position in niche segments of the US primary insurance market is a significant aspect of our strategy," said Munich Re board member Peter Roeder, who will take over sole responsibility for the US market in January.
Munich Re said it saw cross-selling opportunities from the acquisition of Midland, which is a leading insurer for manufactured housing and motor homes. It also did not exclude further US acquisitions.
The take-over should boost Munich Re's earnings per share as soon as it takes effect, adding 0.12 euros to EPS in 2008 and 0.38 euros by 2010, Munich Re said. Regulatory approval is expected in the first half of next year, though it might take longer, the company said.
Analysts said the acquisition price looked high, at over 16 times expected 2008 earnings, and that other insurers had also entered the highly competitive speciality insurance market.
Comments
Comments are closed.