Liberty Says Deal To Buy Safeco Still On

Boston-based Liberty Mutual Group and Safeco Corp. in Seattle, apparently reacting to negative rumors, announced last night that Liberty Mutual's plan to acquire Safeco for $6.2 billion remains on track.

The insurance companies' statement said they had no intention, and specifically disclaim any obligation, to provide any update with respect to the matters addressed in their release, or to otherwise address any rumors in the market generally. In addition, both companies said their policies with respect to addressing market rumors remains in place.

Liberty Mutual “reaffirms its commitment to consummate its previously announced acquisition,” the statement said.

The transaction is due to conclude by the end of the third quarter, subject to regulatory and Safeco shareholder approval.

Under the terms of the merger agreement, Liberty Mutual will acquire all outstanding shares of common stock of Safeco for $68.25 per share in cash–which, when the deal was announced on April 23, was a 51 percent premium over the carrier's share price then of $45.25. It opened today at $64.52.

The transaction is not subject to financing contingencies, the firms said.

Standard & Poor's and Fitch Ratings were less enthusiastic when the deal was announced. Both rating agencies placed Liberty Mutual on credit watch with negative implications, questioning the acquisition's financing.

Moody's affirmed Liberty Mutual's financial strength rating of “A2,” but dropped Safeco's rating, placing it on review for possible downgrade.

The deal calls for a combination of cash and debt. The rating agencies said they are concerned with Liberty Mutual's capital adequacy. Fitch noted that Liberty could face some difficulty raising capital for its debt due to a challenging credit market.

Today's statement listed that Liberty Mutual Group, as of Dec. 31, 2007, had $94.742 billion in consolidated assets, $82.376 billion in consolidated liabilities and $25.961 billion in annual consolidated revenue.