Des Moines, IA – Employers Mutual Casualty Company (“EMCC”) and EMC Insurance Group Inc. (Nasdaq: EMCI) (“EMCI”) recently announced that following an extensive and thorough negotiation process conducted by an independent Special Committee of the EMCI Board of Directors, they have entered into a definitive merger agreement pursuant to which EMCC, which currently owns approximately 55% of EMCI’s outstanding shares, will acquire all of the remaining shares of EMCI for $36.00 per share in cash. The transaction has an equity value of approximately $356 million based solely upon the outstanding shares of EMCI not owned by EMCC. To effect the transaction, EMCC formed a new wholly-owned subsidiary to be merged into EMCI.
The $36.00 per share purchase price represents an approximate 50% premium to the $23.99 closing market price of EMCI’s common stock on November 15, 2018 , the last trading day prior to the public announcement of EMCC’s original proposal to acquire 100% ownership of EMCI. It also represents a 27% premium to EMCI’s $28.44 book value per share as of March 31, 2019 , a 16% premium to EMCI’s 52-week closing high prior to the public announcement of EMCC’s original proposal and an increase of 20% over EMCC’s originally proposed purchase price of $30.00 per share.
In response to EMCC’s original proposal, the EMCI Board formed a Special Committee comprised of independent directors. Bruce G. Kelley , President, Chief Executive Officer and a director of both EMCI and EMCC, recused himself from all of EMCI’s and EMCC’s respective discussions, considerations, recommendations and votes with respect to the proposed transaction. The Special Committee reviewed EMCC’s proposal and considered other options available to EMCI. The EMCI Special Committee was advised by independent financial and legal advisors, and the Special Committee received an opinion from its financial advisor that the $36.00 per share cash purchase price is fair, from a financial point of view, to EMCI’s minority shareholders. The Special Committee ultimately determined that EMCC’s proposed transaction is in the best interests of EMCI and its minority shareholders and unanimously recommended the transaction to EMCI’s Board, which approved the transaction (with Mr. Kelley recusing himself).
Stephen A. Crane , Chairman of the EMCI Special Committee and Chairman of EMCI, said, “We are pleased to reach this agreement, which provides our minority shareholders with immediate and substantial cash value, as well as a significant premium to our unaffected stock price. The Special Committee and its advisors conducted a thorough and independent process to carefully review EMCC’s proposal and consider other options available to the company. We believe that EMCC’s $36.00 per share cash proposal represents the best available outcome for our minority shareholders. We encourage our minority shareholders to support the proposed transaction.”
David J.W. Proctor , J.D., Chairman of the Board of Directors of EMCC, stated, “We believe this transaction will drive enhanced value for our organization and our policyholders. The resulting simplified ownership structure will eliminate the divergent corporate financial and operational expectations of multiple stakeholders and allow us to focus solely on serving the best interests of our policyholders. The transaction will also eliminate the costs and regulatory burdens of maintaining a publicly-traded company and provide us with increased financial flexibility to more effectively deliver enhanced value for our policyholders. Additionally, we fully expect to retain our ‘A’ rating from A.M. Best after the completion of this transaction.”
Transaction Details
The transaction requires the receipt of “majority of the minority” shareholder approval of the transaction and provides an opportunity for EMCI’s shareholders to exercise their appraisal rights in connection with the proposed transaction. The transaction does not provide for any termination or “break-up” fees. EMCI will file a Current Report on Form 8-K with the Securities and Exchange Commission (SEC), which will more fully describe the terms and conditions of the merger agreement and the proposed transaction.
Timeline to Close
The proposed transaction is anticipated to close in the second half of 2019, subject to satisfaction or waiver of customary closing conditions, including the approval of the transaction by the holders of a majority of the outstanding shares of EMCI common stock not owned by EMCC, its affiliates and the executive officers and directors of EMCI, EMCC and their respective subsidiaries. The transaction is not subject to a financing condition. As a result of the proposed transaction, EMCI has agreed to postpone its 2019 annual shareholders meeting.
Advisors
Sandler O’Neill & Partners, L.P. is serving as financial advisor to the EMCI Special Committee. Boenning & Scattergood , Inc. provided financial advice to EMCC’s Board of Directors.
Willkie Farr & Gallagher LLP is acting as legal counsel to the EMCI Special Committee. Foley & Lardner LLP is acting as legal counsel to EMCC.
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Source: EMC Insurance Group