Mayer Brown and Sidley Austin advised on the deal. Citigroup Global Markets Inc. acted as lead financial advisor to The Hartford, with Deutsche Bank Securities Inc. also providing financial advice.
The Hartford has signed a definitive agreement to acquire all outstanding common shares of The Navigators Group, Inc. (NASDAQ:NAVG), a global specialty underwriter, for $70 a share, or $2.1 billion in cash. The transaction has been approved by the boards of directors of both companies and is subject to approval by Navigators’ shareholders and other customary closing conditions, including regulatory approvals. It is expected to close in the first half of 2019.
Navigators, which was founded in 1974, is recognized as a market leader in the global marine, construction and energy industries, as well as in U.S. excess casualty and surplus lines. In addition to an established presence at Lloyd’s, the company also has growing underwriting operations in Europe, Asia and Latin America. The company currently operates three business segments: U.S. Insurance (58 percent of 2017 gross written premiums), International Insurance (29 percent) and Global Reinsurance (13 percent). 1
The Hartford’s President Doug Elliot added, “This transaction combines two organizations with disciplined underwriting cultures and a shared commitment to innovation, financial performance, and attracting and retaining top talent. Together, we will leverage a more complete product and service offering through a best-in-class distribution network enabled by our combined underwriting, claim capabilities and risk engineering, and enhanced by The Hartford’s strong brand.”
Navigators is headquartered in Stamford, Conn., with 22 locations in the U.S. and eight locations internationally. The company has approximately 820 employees globally who will join The Hartford upon closing. Approximately 600 of its employees are based in the U.S. and 150 are located in the U.K.
The Hartford has sufficient existing resources to fund the total purchase price of approximately $2.1 billion, but will consider alternative sources of capital prior to the closing. The Hartford does not intend to issue common equity in connection with the acquisition.
The Hartford expects the acquisition to generate an attractive return over time. The impact of the acquisition on The Hartford’s consolidated 2019 and 2020 financial results will depend on a variety of factors, including the timing of the close, finalization of purchase accounting impacts, such as determination of goodwill and other intangible assets, integration costs, and acquisition-related charges, including transaction costs and changes in Navigators’ loss reserves or other balance sheet items.
The acquisition is expected to result in an immaterial reduction in 2019 net income before considering the impact of acquisition-related charges, which have not yet been finalized. Excluding acquisition-related charges as well as integration costs*, the company expects the acquisition to be immediately accretive to 2019 net income.
For 2020, The Hartford expects the acquisition to be accretive to net income by $30 million to $75 million and to core earnings by $60 million to $95 million. This is comprised of a contribution by Navigators of $80 million to $125 million to net income and $110 million to $145 million to core earnings, offset by a reduction of approximately $50 million in The Hartford’s net investment income, after tax, due to the cash used to fund the acquisition. All of these estimates are preliminary and will be updated based on market conditions, business plans, financial results and other developments between now and closing.
Mayer Brown advised The Hartford with a team led by New York-based partner Stephen Rooney (Picture) and Chicago-based partner Andrew Noreuil.
Sidley advised The Navigators Group, Inc. with a team including
Michael A. Gordon (M&A), Kirk Lipsey (Insurance), Gabe Saltarelli (M&A), Andrew P. Erdmann, Jessica Wood, Andrew R. Holland, James Phythian-Adams, Audry X. Casusol, Gregory A. Marrs and Suresh T. Advani.
Involved fees earner: Andrew Noreuil – Mayer & Brown; Stephen Rooney – Mayer & Brown; Michael Gordon – Sidley Austin LLP; Kirk Lipsey – Sidley Austin LLP; Gabriel Saltarelli – Sidley Austin LLP; Andrew Erdmann – Sidley Austin LLP; Jessica Wood – Sidley Austin LLP; Andrew Holland – Sidley Austin LLP; Andrew Holland – Sidley Austin LLP; James Phythian-Adams – Sidley Austin LLP; Audry Casusol – Sidley Austin LLP; Gregory Marrs – Sidley Austin LLP; Suresh Advani – Sidley Austin LLP;