TOKYO & NEW YORK–(BUSINESS WIRE)–Tokio Marine Holdings, Inc. (TMHD) and Delphi Financial Group, Inc. (Delphi) (NYSE:DFG) today announced that they have entered into a definitive agreement under which TMHD will acquire all outstanding shares of Delphi, a leading financial services holding company comprised of specialty life and property & casualty insurance and insurance-related businesses, for $43.875 per Class A share and $52.875 per Class B share in cash, through TMHD’s wholly owned subsidiary, Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF). In addition, Delphi shareholders will receive $1.00 in cash per share pursuant to a one-time special dividend from Delphi for each share of Class A and Class B stock they own. The total transaction value is approximately U.S. $2.7 billion and is expected to close in the second quarter of 2012.
The acquisition of Delphi further solidifies and effectively complements Tokio Marine’s presence in the U.S. property & casualty market and marks its entrance into the U.S. life insurance market. Delphi, founded in 1987 by Robert Rosenkranz, has three main subsidiaries. Delphi’s life insurance subsidiary, Reliance Standard Life Insurance Company, underwrites a diverse portfolio of group employee benefits and also markets asset accumulation products, primarily fixed annuities, to individuals. Its property & casualty subsidiary, Safety National Casualty Corporation, is the clear leader and longest tenured insurer in the excess workers’ compensation market in the U.S. A third subsidiary, Matrix Absence Management, Inc. provides integrated disability and absence management services to the employee benefits market. Delphi and its primary subsidiaries are well positioned to benefit from Tokio Marine’s financial strength and international market knowledge, to leverage the business relationships of Tokio Marine’s existing U.S. operations, particularly Philadelphia Consolidated, and to expand and diversify the revenues and capabilities of Tokio Marine.
Shuzo Sumi, President of Tokio Marine, said, “The Tokio Marine Group has been seeking continued expansion of its international insurance business as a major driving force of its mid to long term growth strategy. The acquisition of Delphi is an important step in this development, serving to further diversify our business mix in the United States. Delphi is an outstanding insurance group with a strong focus on niche business lines in the employee benefits market. It has an experienced and excellent management team with strict underwriting discipline and a strong bottom line orientation.”
Robert Rosenkranz, Chairman and Chief Executive Officer of Delphi, said, “I am particularly pleased with this transaction and that Delphi will be a strategically important part of the Tokio Marine group, whose transformation into a global insurance enterprise was spearheaded by the acquisitions of such outstanding companies as Philadelphia Consolidated and Kiln Group at Lloyd’s. Tokio Marine has shown a great deal of respect for our corporate culture and expects us to operate with a high degree of autonomy. Merging with Tokio Marine is exciting because it will leverage our underwriting and investment expertise and give us access to substantial resources to take advantage of acquisitions and other new business opportunities.”
Don Sherman, President & Chief Operating Officer of Delphi, said, “This is an excellent outcome for both our shareholders and Tokio Marine. I am very proud of our employees whose efforts created one of the most successful specialty insurance companies in the U.S. Our expertise in the employee benefits, excess workers’ compensation, annuity and investment areas, coupled with Tokio Marine’s global resources, should allow the company to realize growth and profitability superior to what we could achieve on a stand-alone basis.”
President Sumi concluded, “Tokio Marine greatly respects the growth and profit record of Delphi achieved under the leadership of its strong management team, both at the holding company and at its principal subsidiaries. We are delighted that this management team is fully committed to the partnership with us, which is critical to the future of the combined business. We share common values and business philosophies and are confident that this will result in an outstanding future together.”
Delphi marks Tokio Marine’s first significant acquisition in the U.S. since it acquired Philadelphia Consolidated in December 2008. Delphi and Philadelphia Consolidated are complementary and provide a unique opportunity to leverage their respective strengths while further diversifying Tokio Marine’s international business.
If Delphi were included in TMHD’s fiscal 2011 earnings estimates (excluding the impact of Thai flood losses) on a pro forma basis, the contribution of international insurance business to TMHD’s total adjusted earnings would increase from 37% to 46%.
Certain Transaction Terms:
Under the terms of the agreement, Tokio Marine will acquire 100% of the shares of Delphi for $43.875 per Class A share and $52.875 per Class B share in cash. In addition, Delphi shareholders will receive $1.00 in cash per share pursuant to a one-time special dividend from Delphi to be paid shortly after closing. Delphi shareholders will also continue to receive their regular quarterly dividends until the transaction closes. The acquisition will be financed through the utilization of Tokio Marine Group cash on hand together with borrowings.
Approvals and Timing:
The Board of Directors of TMHD and a Special Committee of the independent directors of Delphi (Special Committee) have unanimously approved the transaction. The transaction was also approved by the Board of Directors of Delphi. In addition, Robert Rosenkranz, who represents 49.9% of Delphi’s votes, has agreed to vote in favor of the transaction. The Special Committee determined that the transaction is fair to and in the best interests of the Class A shareholders. The acquisition is subject to the approval of Delphi shareholders, including approval by the holders of a majority of the Class A shares, other than TMHD, Mr. Rosenkranz, Delphi’s directors and officers and their affiliates, and the approval of various regulatory authorities in Japan and the U.S., as well as other customary closing conditions. The transaction is expected to close in the second quarter of 2012.
Macquarie Capital acted as financial advisor to Tokio Marine in this transaction and Sullivan & Cromwell LLP provided external legal counsel. Lazard acted as financial advisor to Delphi’s Special Committee of Independent Directors of its Board of Directors and Cravath Swaine & Moore LLP provided external legal counsel to the Special Committee. Morris, Nichols, Arsht & Tunnell LLP provided external legal counsel to Delphi.