Allstate acquires National General in $4bn transaction

September 2020 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

September 2020 Issue

In a deal designed to scale up its auto insurance business at a time when coronavirus (COVID-19) has decimated traffic on roads and reduced claims, US insurer Allstate Corporation is to acquire National General Holdings Corporation for approximately $4bn.

The acquisition will see National General shareholders receive $32.00 per share in cash from Allstate, plus closing dividends expected to be $2.50 per share, providing $34.50 in total value per share. Allstate will fund the share purchase by deploying $2.2bn in combined cash resources and, subject to market conditions, issuing $1.5bn of new senior debt. Allstate also expects to maintain its current share repurchase programme.

Allstate offers a broad array of protection products through multiple brands and diverse distribution channels, including auto, home, life and other insurance. It protects people through the operation of more than 153.7 million proprietary policies.

“Acquiring National General accelerates Allstate’s strategy to increase market share in personal property-liability and significantly expands our independent agent distribution,” said Tom Wilson, chair, president and chief executive of Allstate. “The acquisition increases personal lines premiums by $4bn and market share by over 1 percentage point to 10 percent. National General’s business and technology platforms will be utilised to further strengthen Allstate’s existing independent agent businesses. The transaction will be accretive to adjusted net income earnings per share and return on equity beginning in the first year.”

New York-based insurer National General provides a wide range of property-liability products through independent agents with a significant presence in non-standard auto insurance. The company also has attractive accident and health and lender-placed insurance businesses.

“Our operating expertise has enabled us to serve customers and independent agents well as we have grown both organically and through acquisition,” said Barry Karfunkel, co-chairman and chief executive of National General. “We are excited about combining our team’s expertise and commitment with Allstate to become a top-five personal lines carrier for independent agents while offering a broader array of products. National General’s shareholders are also benefiting by unlocking the value created over the last decade.”

Furthermore, National General’s board of directors has approved the transaction, which includes customary terms and conditions, including a breakup fee of $132.5m. A voting agreement has also been signed with entities controlling 40 percent of National General’s common shares to vote for the transaction.

“As proud shareholders since 2013, we support the decision of National General’s board of directors to move forward with this strategic transaction,” said John Phelan, managing partner and co-founder of MSD Capital, LP and MSD Partners, LP, which owns approximately 7.4 percent of National General’s outstanding common shares. Dan Bitar, a managing director at MSD Capital, added: “We believe the transaction is allowing National General’s employees, customers and shareholders to benefit from the significant franchise value created by the management team over the last decade.”

Exclusive financial adviser to Allstate is Ardea Partners LP, with Willkie Farr & Gallagher LLP as legal adviser. For National General, J.P. Morgan Securities LLC is legal adviser and Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal counsel.

The transaction is expected to close in early 2021, subject to regulatory approvals and other customary closing conditions.

Fraser Tennant