PMA Capital has entered into a merger agreement with Old Republic International pursuant to which Old Republic will acquire all of PMA’s outstanding common stock.
Under the terms of agreement, Old Republic will issue 0.55 shares of Old Republic common stock in exchange for each outstanding common share of PMA. Depending on the price of Old Republic’s common stock preceding closing of the merger, exchange ratio may be adjusted upwards or downwards, but will not exceed 0.60 or be less than 0.50.
In addition, the initial exchange ratio represents a premium of around 15% to closing price of PMA’s common stock on June 8, 2010. As of the latter date the transaction therefore attributes a total enterprise value for PMA of around $365m, consisting of $228m for PMA common shares and $137m for its debt.
The transaction is expected to close during the third quarter of 2010, subject to approval by PMA’s shareholders, regulatory approvals and other customary closing conditions.
Vincent Donnelly, president and CEO of PMA Capital, said: “Following the closing, we will continue to do business as the PMA Companies, and we will maintain our company headquarters in Blue Bell, Pennsylvania with our experienced leadership team and local service locations.