United Fire & Casualty, a property and casualty insurer, and Mercer Insurance Group have entered into a merger agreement.

Under the terms of the agreement, United Fire will acquire all of the outstanding shares of Mercer Insurance common stock.

United Fire said Mercer Insurance shareholders will receive $28.25 per share in cash, representing an aggregate transaction value of approximately $191m. It expects to finance the transaction with a combination of available cash and bank financing.

Upon completion of the merger, the combined company is expected to be a top 50 US publicly traded property casualty writer, based on 2009 net written premiums of both the companies.

United Fire management expects the transaction to benefit all stakeholders and to provide an improved strategic position for anticipated strong financial performance going forward, including diversified risk profile and common business approach.

With diversified risk profile and increased scale, combined company will market commercial and personal insurance through approximately 1,400 independent agents in 24 states.

United Fire president and CEO Randy Ramlo said the transaction is a very attractive financial opportunity for United Fire, and anticipate the transaction will contribute to the net income and return on equity no later than 2012.

The transaction is subject to customary conditions, including approval by the shareholders of Mercer Insurance and regulatory authorities and is expected to close at the end of the first quarter of 2011.