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St. Paul to Buy
Travelers for $16.84 Bln
The deal comes about a year and a half after Travelers was split off from Citigroup Inc. (NYSE:C - News). The transaction should add to the combined company's earnings, executives said in a conference call.
Shares of Both St. Paul and Travelers rose in early trading, adding to the all-stock deal's value, which originally was about $16 billion. St. Paul shares rose about 5.25 percent while Travelers class A shares were up more than 1.6 percent and its class B shares were up 1.25 percent.
Travelers' shareholders will receive 0.4334 of a St. Paul share for each of their shares.
Based on Monday's early trading, that values Travelers at $16.76 per share.
The combined company will be known as St. Paul Travelers Cos. and be based in St. Paul, Minnesota, where St. Paul is now based. Travelers is based in Hartford, Connecticut.
The merger, expected to close in the second quarter of 2004, will create a company with $107 billion of assets, $26 billion of capital, and $20 billion of premiums, the companies said. The largest insurer is American International Group Inc. (NYSE:AIG - News)
"I expect the transaction to enhance growth opportunities and enable the combined company to benefit from improved efficiencies and economies of scale," said Jay Fishman, St. Paul's chairman and chief executive, in a statement.
Fishman, 51, will become chief executive of the combined company. Robert Lipp, Travelers' 65-year-old chairman and chief executive, will become executive chairman through Jan. 1, 2006, when Fishman is expected to become chairman. Twelve directors will come from Travelers, and 11 from St. Paul.
The combined company is expected to pay 88 cents of annual dividends. St. Paul said it expects to pay a special dividend before closing so that its shareholders receive $1.16 per share, the company's current annual dividend, in 2004.
Travelers third-quarter profit rose 28 percent to $426.1 million, while St. Paul profit more than tripled to $214 million, helped by rising premiums.
Citigroup Global Markets and Lehman Brothers Inc. advised Travelers on the transaction. Goldman Sachs & Co. and Merrill Lynch & Co. advised St. Paul.
St. Paul shares were up $1.95 at $38.72 while Travelers class A shares were up 27 cents at $16.30 and its class B shares were up 22 cents at $16.28, all on the NYSE.