Japanese insurer Tokio Marine Holdings Inc. (TMHD) said today itwill acquire Philadelphia Consolidated for $4.7 billion, andanalysts saw the transaction as a good deal for the Bala Cynwyd,Pa.-based property-casualty insurer.

Analysts said the price should make Philadelphia Consolidatedstockholders happy and the acquisition will provide opportunity forTMHD to expand its presence in Europe and the United States.

The companies said TMHD will acquire all outstanding shares ofPhiladelphia Consolidated, for $61.50 per share in cash, throughTMHD's wholly owned subsidiary, Tokio Marine & Nichido FireInsurance Co., Ltd. (TMNF).

Robert Farnam, an analyst with Keefe, Bruyette & Woods, saidhe had seen Philadelphia Consolidated as an acquisition target, butthe sale was for more than he had expected. He said he had guessedit would go for 2.4- to 2.7-times book, "and they went for2.75."

He and other analysts said that from what the companies said ina briefing it appeared that Philadelphia Consolidated would be ableto operate in a relatively autonomous fashion and there would be nolayoffs involved.

Mike Grasher of Piper Jaffray said based on what management saidPhiladelphia Consolidated had "done their homework and looked intoother suitors and came away with Tokio Marine as the best fit."

He noted that risks are always involved with integratingcompanies, but it sounded as though Philadelphia Consolidated wouldbe left alone to do its business while "ratcheting up their productin other markets."

South America and Canada are markets that TMHD would like to usePhiladelphia Consolidated to enter, and the U.S. company's products"may play well in Europe," he said.

Standard & Poor's said it was affirming the Japanese firm'sratings with a stable outlook. It said that given TMHD's recentacquisition of London-based Kiln Ltd., the firm is "challenged topromptly consolidate the acquired companies into the group andestablish group-wide management and risk management systems.

If TMHD's overseas business progresses as planned, S&P saidthe firm could be due for an upgrade.

Philadelphia Consolidated has 47 offices and approximately 1,400employees across the United States. The companies said thetransaction would combine Tokio Marine's financial strength andinternational market knowledge with Philadelphia Consolidated'sproduct development capabilities and multichannel distributionexpertise.

Shuzo Sumi, president of Tokio Marine, said in a statement,"Expansion of revenue and profits from international business isthe driving force of Tokio Marine's mid- to long-term growthstrategy. The acquisition of Philadelphia Consolidated isconsistent with our aspirations of expanding globally and realizinga well-balanced business portfolio."

He called Philadelphia Consolidated "an excellent strategic fitfor us."

"When opportunities to acquire a premier organization arise, thebest response is to act," Mr. Sumi said.

James J. Maguire, Philadelphia Consolidated's chairman, said, "Ifounded this company in 1962. This is a great opportunity for us totake the company to the next level, and as a demonstration of ourcommitment, the executive management team and I will be making asubstantial investment in TMHD's stock promptly after closing ofthe transaction, and I will become a member of the InternationalStrategic Committee of Tokio Marine."

James J. Maguire Jr., Philadelphia Consolidated's chiefexecutive officer, said his company's management is "committed tothe successful growth of the business and delivering a performancewhich will continue our superior level of achievement."

"Joining the Tokio Marine Group with its international reachwill fuel the next stage of our growth and will provide numerousbenefits for our customers, brokers, agents and employees."

The Pennsylvania firm will provide a platform for Tokio Marine,while Tokio Marine's "credit quality and overall financial strengthwill open up additional avenues of expansion, further enabling thecombined company to generate enhanced returns," he said.

Mr. Sumi said the firms believe "we share common fundamentalvalues and a business philosophy, and we look forward to a long andsuccessful partnership."

The companies announced the profits and losses of PhiladelphiaConsolidated will be consolidated into TMHD's financial statementsfrom fiscal year 2009 and will deliver greater earnings consistencythroughout the insurance pricing cycle.

The boards of directors of both companies have unanimouslyapproved the transaction and key family shareholders, representingapproximately 18 percent of Philadelphia Consolidated's outstandingshares, have agreed to vote in favor of the transaction.

The acquisition is subject to the approval of PhiladelphiaConsolidated shareholders and the approval of various regulatoryauthorities in Japan and the United States. The transaction isexpected to close in the fourth quarter of 2008.

Fox-Pitt Kelton Cochran Caronia Waller acted as financialadvisors to Tokio Marine for the transaction and Sullivan &Cromwell LLP provided external legal counsel. Merrill Lynch &Co. acted as financial advisors to Philadelphia Consolidated andWolfBlock LLP provided external legal counsel.