Liberty Mutual Agrees to Purchase State Auto at 200% Premium

(Bloomberg) -- Liberty Mutual Holding Co. agreed to buy State Auto Financial Corp. in a transaction that includes purchasing all of the publicly traded shares for $52 apiece, valuing the company at about $2.29 billion.

The purchase price is three times higher than State Auto’s closing share price on Friday. Shares of Columbus, Ohio-based State Auto were down 2.7% this year through Friday, and surged to a record $50.22 at 4:30 p.m. in New York.

“State Auto Group’s capabilities and product expertise are an ideal complement to Liberty Mutual’s domestic personal lines and small commercial business,” Liberty Mutual Chief Executive Officer David Long said in a statement Monday. The acquisition gives Liberty Mutual roughly 3,400 independent agencies in 33 U.S. states, according to the statement.

There have been about $9.3 billion worth of mergers and acquisitions among property and casualty insurers so far in 2021, according to data compiled by Bloomberg. That’s about half of the sector’s deal volume in the same period last year, which includes Allstate Corp.’s roughly $4 billion acquisition of National General Holdings Corp.

Liberty Mutual is owned by its policyholders and is one of the more acquisitive insurers with that structure. It expanded in commercial coverage in 2017 with the purchase of Ironshore Inc. from Fosun International Ltd., and in 2008 it added share in the auto market by buying Safeco Corp. for more than $6 billion.

“Further consolidation in auto insurance is unsurprising,” Matthew Palazola, an analyst at Bloomberg Intelligence, said in an email. “We believe the largest players with scale and deep pockets will continue to expand distributions channels. Liberty’s deal solidifies it’s position with independent agents.”

Palazola added that the premium Liberty Mutual paid could be motivated by a desire to expand its property-and-casualty business after divesting its group life insurance unit a few years ago.

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