The Midland Company, a provider of specialty insurance products and services, has signed a definitive merger agreement with Munich Re, whereby Munich Re will acquire all of its outstanding stock.

According to the agreement, stockholders of The Midland Company will receive $65 in cash per share. This represents a 13.5% premium above the October 16, 2007 closing price of $57.27 and a 55% premium over Midland’s share price at the start of 2007. The transaction is expected to be completed in the first half of 2008, subject to shareholder and regulatory approvals, as well as other customary closing conditions.

The proposed transaction has been approved by the board of directors of both the companies. The equity component of the transaction is valued at $1.3 billion and Munich Re will also assume all outstanding debt obligations. Midland intends to continue to pay regular cash dividends to shareholders until the completion of the transaction.