Hartford Agrees to Buy Navigators for $2.1 Billion in Cash

(Bloomberg) -- Hartford Financial Services Group Inc. agreed to purchase Navigators Group Inc. for about $2.1 billion in cash, expanding into specialty coverage with the insurer’s biggest acquisition ever.

Hartford will pay $70 a share for Navigators, the companies said Wednesday in separate statements, or about 8.9 percent more than Navigators’ closing price Tuesday. The deal includes a 30-day “go-shop” provision for other suitors to propose a deal for Navigators, whose shares have surged 32 percent this year.

Hartford Chief Executive Officer Christopher Swift has been expanding the company after the insurer spent years narrowing its focus following the financial crisis. Hartford agreed last year to buy Aetna Inc.’s U.S. group life and disability business for $1.45 billion and snapped up a Georgia-based commercial insurer, Maxum Specialty Insurance Group, in 2016.

“Hartford had indicated that it was interested in doing acquisitions in the specialty space and, while this deal is probably a little larger than what we would have anticipated, it’s a property with a reasonably good track record and some well-established specialties that Hartford can expand upon,” Mark Dwelle, an analyst at RBC Capital Markets, said Wednesday in a note to clients.

Shares of Navigators jumped 8.9 percent to $69.95 at 9:49 a.m. in New York. Hartford fell 3 percent to $50.75.

“Shareholders had hoped for capital return as opposed to M&A, so we expect the shares could trade down on the news,” Elyse Greenspan, an analyst at Wells Fargo & Co., said in a note to clients.

820 Employees

Navigators, based in Stamford, Connecticut, operates in the U.S., Europe, Asia and Latin America. The company offers insurance to the marine, construction and energy industries, as well as specialty coverage in the U.S. The company’s 820 employees will join Hartford when the deal is completed.

The deal “expands our product offerings and geographic reach, and adds tenured and proven underwriting and industry talent,” Swift said in the statement. “We are optimistic about our combined growth opportunities and expect the acquisition to generate attractive returns.”

Hartford said it has “sufficient” resources to fund the deal but may consider alternative sources of capital, without issuing common shares. The acquisition will likely reduce Hartford’s net income in 2019, but by an immaterial amount, the firm said. In 2020, the deal should add $30 million to $75 million to net income, according to the company.

“We look forward to bringing Navigators’ specialty lines capabilities to the Hartford,” Stanley Galanski, Navigators’ president and CEO, said in that company’s statement. The transaction “is a testament to the caliber and dedication of our people and the strength of our underwriting culture.”

The deal is expected to be completed in the first half of 2019 and Navigators’ founder, along with other members of that family who control shares, agreed to support the transaction, according to the statement. Navigators was advised by Goldman Sachs Group Inc. and Moelis & Co., as well as Sidley Austin LLP. Hartford used Citigroup Inc., Deutsche Bank AG and Mayer Brown.

©2018 Bloomberg L.P.