Mortgage insurer MGIC Investment plans to buy rival Radian Group for about $5 billion, the companies said, a move that will allow them to cut costs.
The combined company, which will have a market capitalization of about $10 billion, expects to realize pretax cost savings of $128 million, 75% of which will be realized in 2008, MGIC and Radian said in a statement.
Radian shareholders will receive 0.9658 MGIC share for each Radian share, valuing the offer at $60.77 a share based on Monday's closing price of $62.93 for MGIC. Based on outstanding share count of 82.05 million in its latest regulatory filing, that puts the deal total at about $5 billion.
That $60.77 is slightly below Radian's closing price of $60.84 on the New York Stock Exchange on Monday.
MGIC Chairman and CEO Curt Culver will lead the new company, while Radian CEO S.A. Ibrahim becomes president and chief operating officer. Ibrahim will succeed Culver as CEO in 2009 and chairman in 2010, the companies said.
The board of directors will initially include six members appointed by MGIC and five members designated by Radian. After the merger, the company will nominate for director an additional Radian director to be elected by the combined company's shareholders.
It will have headquarters in Milwaukee, Wisconsin, where MGIC is based.