Nationwide Mutual Insurance Co. will acquire Harleysville MutualInsurance Co. in a deal valued at around $800 million.

“This combination brings together two best-in-class companiesthat share a mutual heritage and a focus on meeting the long-termneeds of our policyholders,” says Steve Rasmussen, CEO ofNationwide.

Michael Browne, president and CEO of Harleysville, says thetransaction “will enable us to expand our business for ourindependent-agency partners and to enter important new markets froma position of even greater strength.”

Under the deal, which is expected to close early next year,Harleysville Mutual will merge with Nationwide Mutual, while thepublicly traded Harleysville Group will become a newly formedsubsidiary of Nationwide Mutual. Shareholders will receive $60 pershare in cash.

According to Google finance, there are more than 27 millionshares of Harleysville outstanding. A Nationwide company spokesmanexplains that under a complicated scenario the number of publiclyheld shares Nationwide would pay for amounts to somewhere between$760 million to $800 million. The remaining outstanding shares heldby Harleysville Mutual would be acquired by Nationwide andretired.

Under the agreement, Harleysville will join Nationwide's P&Cindependent-agency business unit under the Harleysville brand. Itscurrent headquarters in Harleysville, Pa. will “serve as anintegral part of the combined company's national, independentagency-based platform.”

Browne will become the president and COO of the Harleysvillecompany.

The companies say that the combined operations will have anestimated net surplus of more than $13.5 billion and over $16billion in annual direct-written premiums.

The agreement between Harleysville and Columbus, Ohio-basedNationwide is still subject to regulatory approval. The companiessay they expect the transaction to close by early next year.

In an interview with NU, Rasmussen and Browne say theybelieve both producers and the carriers will benefit from thetransaction.

“For independent agents, this adds another carrier that has anational footprint and presence [to their portfolio],” saysRasmussen. “This adds to Nationwide's portfolio that includesAllied and all our other independent-agency companies that areroughly a third of our revenue.”

He says the addition of the Harleysville book of business andthe relationships the company has developed in the Northeast “makeus a more formidable national independent-agency company for bothcommercial and personal lines.”

Browne says the geographic strength of Harleysville east of theMississippi complements Allied Insurance, the independent-agencyaffiliate of Nationwide that is strong west of the Mississippi.