American International Group, Inc. (AIG) has submitted a letter to the board of directors of 21st Century Insurance Group proposing to acquire the outstanding 38.1 percent publicly held shares of 21st Century for $19.75 per share in cash.
AIG and its subsidiaries own approximately 61.9 percent of the outstanding shares of 21st Century. The aggregate cash consideration payable would be approximately $690 million. Following the transaction, 21st Century would become a wholly owned subsidiary of AIG.
Founded in 1958, 21st Century is a direct-to-consumer provider of personal auto insurance. With $1.4 billion of revenue in 2005, the company insures 1.5 million vehicles in 17 states (Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Minnesota, Missouri, Nevada, New Jersey, Ohio, Oregon, Pennsylvania, Texas, Washington and Wisconsin).
The proposed per share price represents a 19.0 percent premium to yesterday’s closing price and a 25.5 percent premium to the average closing price during the last 12 months. The proposed per share price also represents a multiple of 19.6x the consensus estimates of 21st Century’s 2007 earnings per share (based on a current First Call estimate of $1.01 per share).
“Our proposal represents an excellent opportunity for 21st Century’s shareholders to monetize their investment at a full and fair value for their shares. For AIG, this is an opportunity to make a substantial additional investment in a business we know well,” said Martin J. Sullivan, president and chief executive officer of AIG.
AIG contemplates that the transaction would be implemented through a merger agreement which would be negotiated and approved by a special committee comprised of directors of 21st Century who are independent of AIG. This proposal is subject to AIG’s satisfactory completion of due diligence and satisfaction of regulatory requirements.
AIG has advised 21st Century that AIG’s sole interest is in acquiring the remaining shares of 21st Century held by the public shareholders and that it has no interest in a disposition of its controlling equity stake in 21st Century.
Source: American International Group, Inc.