In the largest merger of this year, insurance provider ACE Limited (NYSE: ACE) has agreed to acquire Chubb Corporation (NYSE: CB) for $28.3 billion in a cash and stock deal.
Chubb shares were up 35% while ACE shares jumped 11% in premarket trading.
ACE is one of the largest multiline property and casualty insurers, operating in over 50 countries. Shareholders of ACE will own 70% of the combined company, which will help clients administer wider insurance coverage, according to Bloomberg. The combined company will globally operate under Chubb’s name. Being one of the largest business insurers in the U.S., specializing in middle-market commercial and contingent insurance, Chubb will allure the expansion of its wealthy based consumers.
According to credit analyst of Imperial Capital LLC, David Havens said, “This is a landmark deal that puts two awfully good companies together and forms a global powerhouse with deep and defensible U.S. market penetration.”
The new board agreed that Chubb shareholders receive $62.93 per share in cash and 0.6019 shares of ACE stock. On June 30, shares closed at $95.14 representing a 30% premium to that price. The deal is expected to close next year in the first quarter.
Evan G. Greenberg, Chairman and CEO of ACE, will lead the merged company while John Finnegan, CEO of Chubb, will become executive vice chairman for external affairs of North America and assist with the assimilation of the two companies.
Through the growth of both companies, they expect to create combined revenue of $31 billion annually and save about $650 million in pretax.
In recent years, countless companies have expanded through mergers and acquisition in constant pursuit of future growth. As society becomes more familiar with the economy, more efficient transactions and deals are made for development.
The two companies unanimously approved this acquisition, which is expected to close in the first quarter of 2016.