Kemper Corporation and Infinity Property and Casualty Corporation have entered into a definitive merger agreement under which Kemper will acquire Infinity in a cash and stock transaction valued at approximately $1.4 billion, or $129.00 per share.
Infinity is a provider of auto insurance focused on serving the specialty, nonstandard segment. It has approximately 2,300 employees, 10,600 independent agents, and $1.4 billion in 2017 direct written premiums.
"This compelling transaction combines two well-known brands with complementary strengths and cultures to form a leader in nonstandard auto insurance, and enhances Kemper's overall growth opportunities, diversification, financial strength, and ability to serve policyholders," said Joseph P. Lacher, Jr., Kemper's president and chief executive officer. "We look forward to welcoming the Infinity team to the Kemper family and working together to deliver greater choice to our policyholders through an expanded product offering and deeper relationships with our agent networks, while generating strong returns for our shareholders."
Glen N. Godwin, Infinity's chief executive officer, added, "Together, our two companies have a terrific strategic and cultural fit. As part of a larger company, Infinity will have access to the capabilities and resources necessary to drive accelerated growth and better serve our policyholders and partner agents. In addition, Infinity shareholders will benefit from immediate and certain value for their shares as well as the opportunity to participate in the significant upside potential of the combined company."
After the transaction is completed, Kemper said, the combined company will have approximately $2.2 billion in nonstandard auto insurance premiums.
According to Kemper, under the terms of the merger agreement, Infinity shareholders will receive $51.60 in cash and 1.2019 Kemper common shares for each share of Infinity common stock. The transaction was valued at approximately $1.4 billion, or $129.00 per Infinity share; the exchange ratio for stock consideration to be issued in the merger was fixed and was determined based on Kemper's 20-trading day volume weighted average price as of February 12, 2018 of $64.40. This represented an approximately 33 percent premium to Infinity's closing price of $97.05 as of February 12, 2018. Based on Kemper's February 12, 2018 closing stock price of $57.75, the implied total consideration was approximately $1.3 billion, or $121.01 per Infinity share, an approximately 25 percent premium to Infinity's closing price of $97.05 as of February 12, 2018. Following the close of the transaction, Infinity shareholders are expected to own approximately 20 percent of the combined company on a pro forma basis.
Kemper said it expects to fund the cash portion of the consideration with a combination of cash on hand from the combined companies and other internal resources. No additional financing resources are needed to consummate the transaction, although Kemper said it may explore issuing an institutional term loan prior to close of the transaction in order to optimize its liquidity position.
The transaction is expected to close in the third quarter of 2018, subject to the satisfaction or waiver of applicable closing conditions, including the approval of shareholders of both companies and receipt of required regulatory clearances and approvals.
According to Kemper, upon completion of the transaction, Infinity's senior management team will be integrated into the newly-combined organization. Additionally, Kemper said, at closing it will increase its current board of directors by one seat and select a director from Infinity to join the Kemper board.
Goldman Sachs & Co. LLC acted as financial advisor to Kemper and Sidley Austin LLP served as legal counsel to Kemper. Deutsche Bank Securities Inc. acted as financial advisor to Infinity and Keating Muething & Klekamp PLL acted as legal counsel to Infinity.