The Hartford Financial to buy Navigators Group for $2.1bn

Navigators Group looked set to surge at the open on Wednesday after agreeing to be bought by The Hartford Financial Services Group for $2.1bn in cash.

Under the terms of the agreement, Navigators shareholders will receive $70 per share in cash upon closing, which represents a multiple of 1.78 times Navigators' fully diluted tangible book value per share as of 30 June and an 18.6% premium to the 90-day trading average stock price.

Navigators president and chief executive, Stanley A. Galanski, said: "This transaction will result in the realization of significant value for our stockholders. We look forward to bringing Navigators’ specialty lines capabilities to The Hartford, an organisation that shares our commitment to underwriting excellence, attracting and retaining top talent, and delivering exceptional customer experiences.

"Joining The Hartford and leveraging the strength of its balance sheet and quality of its core commercial insurance products, we will create exciting opportunities to deliver enhanced value to our brokers and policyholders."

The Hartford's chairman and CEO, Christopher Swift, said the deal expands the company's product offerings and geographic reach, and adds "tenured and proven" underwriting and industry talent while strengthening its value proposition to agents and customers.

"We are optimistic about our combined growth opportunities and expect the acquisition to generate attractive returns," he said.

The transaction, which was unanimously approved by Navigators’ board of directors, is subject to regulatory and stockholder approvals and other customary closing conditions, and is expected to close in the first half of next year.

RBC Capital Markets said it would expect synergies to be fairly limited given the nature of the specialties involved and the fact that Hartford isn't already involved in many of the lines Navigators writes.

"The deal will give Hartford a bit of international exposure and will give it a presence at Lloyd's. It also adds to the company's overall size and scale, which could produce some modest expense synergies. The deal definitely precludes any meaningful capital management for the foreseeable future (we hadn't modeled any). While we view the property as reasonably attractive, the deal valuation is on the high side relative to other similar properties that have transacted."

At 1230 BST, Navigators shares were up 10.4% to $70.95 in pre-market trade.