Chubb shares surge on $28bn ACE deal

Shares in Chubb Corp rocketed 30% on Wednesday after Swiss insurer ACE Ltd said it will buy the US property insurer for $28.3bn in cash and stock.

The consideration represents a premium of around 30% to Chubb’s closing price of $95.14 on 30 June, with Chubb shareholders receiving $62.93 per share in cash and 0.6019 ACE shares.

“Together, ACE and Chubb will create a global leader in commercial and personal property and casualty (P&C) insurance, with enhanced growth and earning power and an exceptional balance of products as a result of greater diversification and a product mix with reduced exposure to the P&C industry pricing cycle,” said ACE.

Upon completion of the transaction, the combined company will be led by ACE chief executive Evan Greenberg who will hold the roles of chairman and chief executive officer.

RBC Capital Markets analyst Mark Dwelle said: “This is a huge transformative deal for both companies and will immediately vault the combined to a global elite status.”

He said it will put them on a par with the largest European and Asian franchises and would actually make them larger than AIG from a P&C insurance standpoint.

“We don't see any immediate barriers to closing and think the price is high enough to be viewed as attractive by shareholders and be hard to top by outside bidders (of which there would be few with the size potential to match),” said Dwelle.

“The only outside bidder that we could foresee that might emerge is Berkshire Hathaway who has long been viewed as a potential suitor to Chubb - that said, bidding wars aren't really their thing so we'd be somewhat surprised.”