Chubb confirms it made $23.24bn offer for the Hartford

Global primary insurance carrier and reinsurance company Chubb has confirmed that it made a roughly $23.24 billion offer for rival the Hartford, offering $65 per share, a deal that falls short of the acquiree’s now boosted valuation of $24.36 billion.

The news broke late yesterday afternoon that Chubb was rumoured to be interested in making a significant acquisition, with the Hartford said to be its target.

At the time the Hartford, or Hartford Financial Services Group Inc., was valued at around $20.7 billion (at opening yesterday), so a rumoured $22 billion offer was a reasonable uplift to that.

The Hartford then confirmed that an unsolicited approach had been made, saying that it had received a non-binding proposal from Chubb.

The Hartford said that its Board of Directors were “carefully considering the proposal”, helped by its financial and legal advisors.

The insurers Board of Directors said they were “committed to acting in the best interests of shareholders over the long term.”

Evan Greenberg’s Chubb has now confirmed the approach was made.

Chubb explained that the proposal, which was to acquire the Hartford outright and combined with it in a largely cash deal with some stock, was an offer that it believed would be “strategically and financially compelling for both sets of shareholders and other constituencies.”

The actual offer made would value the Hartford at $65 per share, so the roughly $23.24 billion (so higher than the rumoured $22bn), which Chubb noted was a 26% premium, based on the Hartford’s 20-day volume weighted average share price of $51.70 as of March 10th 2021.

That looked very attractive, until the news broke and the Hartford’s shares soared by 19% in the day yesterday, lifting its valuation to a high of over $24.6 billion during trading, to close yesterday at $24.36 billion.

Chubb said that it had not received a response to its proposal, but that the company was “looking forward to constructive, private discussions in order to expeditiously consummate a fair transaction that benefits all of our respective stakeholders.”

No agreement has been reached, Chubb continued, adding that there’s no assurance any deal would be consummated between itself and the Hartford and no assurance as to any deals structure, or timing.

With the Hartford now valued higher than Chubb’s offer, it remains to be seen whether the pair can find a way to complete a combination.

It is a compelling deal, with benefits of additional scale for Chubb and value creation for the Hartford’s shareholders, and an overall global insurance and reinsurance entity valued much nearer to $100 billion the likely end-point (based on Chubb’s market-cap around $77bn), if a way forward can be identified.

Could a counter offer come in, now that the Hartford’s Board may be thinking whether there is a better offer that more closely matches its new-found valuation? Perhaps.

But Chubb would be a great partner for the Hartford, as the synergies are evident and it’s possible there may not be a better offer out there anyway.

The Hartford has a leading small business insurance franchise, which would be a strong complement to Chubb’s leading large commercial insurance operations.

Additionally, Chubb’s use of reinsurance capital could bring efficiencies to the combined venture, while its reinsurance underwriting and truly global footprint adds a level of diversification the Hartford has not had.

Also read: Our recent analysis of Chubb’s third-party capitalised reinsurance joint-venture ABR Re.