Munich Re to Buy US Insurer Midland for $1.3 Billion


German reinsurance company Munich Re will acquire specialty insurance company Midland for $1.3 billion, or $65 per share in a bid to expand in the US, the companies said on Wednesday.

The offer, which is subject to regulatory and other approvals, represents a 13.5 percent premium over Midland's closing price of $57.27 on Oct. 16.

The deal, which Munich Re is financing through its own funds, is part of its US strategy revamp aimed at achieving sustainable and profitable growth in the world's biggest reinsurance market.

Munich Re sees cross-selling opportunities through its acquisition of Midland, which is a leading insurer in niche markets such as for manufactured housing and motor homes.

Cincinnati-based Midland, which offers casualty and property insurance, said the deal will help it expand globally "in ways that may not have been possible without the capital, resources and reputation of an organization like Munich Re."

Midland had net profit of $71 million on premium income of $832 million in 2006, yielding a return on equity of 13.3 percent, Munich Re said.

Munich Re shares were indicated unchanged before the market opening in Frankfurt.

Under the terms of the deal, Munich Re will assume all outstanding debt obligations for Midland.

Midland said it formed a special board committee this year to explore strategic alternatives, hiring Swiss investment bank UBS to advise it.

Munich Re was advised by Lehman Brothers.