Liberty Mutual to Buy Ohio Casualty for $2.7 Billion

Business insurer Liberty Mutual Group has agreed to purchase Ohio Casualty Corp. for $2.7 billion in cash, or $44 per share. The price represents a 32% premium to the shares' Friday close of $33.32. The transaction, which Liberty Mutual will finance through cash on hand and short-term debt, is expected to close in Q3. In 2006, Liberty Mutual sold policies worth $5.9 billion through independent agents and Ohio Casualty $1.4 billion. Edmund F. Kelly, president and CEO of Liberty Mutual, said the company will pursue other acquisition opportunities -- particularly abroad, where the company now generates 20% of its business. Liberty will fold Ohio Casualty into its Agency Markets unit, a network of 11 companies that sells insurance regionally through independent agents. Ohio Casualty will give Liberty Mutual's agent relationships an increase of about one-third to almost 10,000. "Ohio Casualty has done a tremendous job building up very strong relationships with their 3,400 agencies,'' said a Liberty spokesman. "That's the value that they bring.''

Sources: MarketWatch, Wall Street Journal, Bloomberg
Commentary: 1Q07 Insurance Earnings: What's Working, What's Not (Part V) • 1Q07 Insurance Earnings: What's Working, What's Not (Part IV)
Stocks/ETFs to watch: Ohio Casualty Corp. (OCAS). Competitors: Allstate Corp. (ALL), The Travelers Companies, Inc. (TRV). ETFs: streetTRACKS KBW Insurance (KIE), PowerShares Dynamic Insurance Portfolio ETF (PIC), iShares Dow Jones U.S. Insurance (IAK)

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.