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United Fire & Casualty to acquire Mercer Insurance Group

CEDAR RAPIDS - United Fire & Casualty Co. late Tuesday announced plans to acquire New Jersey-based Mercer Insurance Group Inc.

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

The transaction, the largest United Fire has undertaken, is expected to close at the end of the first quarter of 2011.

The combined company is expected to be a top 50 U.S. publicly traded property and casualty insurer, based on 2009 net written premiums, which consist of about 91 percent commercial lines.

Mercer Insurance shareholders will receive $28.25 per share in cash, representing an aggregate transaction value of about $191 million. The price represents a premium of 49.8 percent to Tuesday's closing price of $18.86 per share for Mercer Insurance common stock.

'United Fire has been looking to enter the mid-Atlantic and West Coast markets for years because of the potential to diversify our risk profile and increase the scale of our operations,' Randy Ramlo, president and chief executive officer of United Fire, said in a news release announcing the merger. 'Mercer Insurance has a long track record of operating profitably in these markets, and we are very pleased that the company and its employees, agents and policyholders will be joining the United Fire family.

'The transaction is a very attractive financial opportunity for United Fire, and we anticipate it will contribute to our net income and return on equity no later than 2012.' The companies will detail the merger in an 8 a.m. conference call today.

The merger is subject to approval by the shareholders of Mercer Insurance and regulatory authorities. Approval of the transaction by United Fire shareholders is not required, and there is no financing condition to complete the merger.

United Fire expects to finance the transaction with a combination of available cash and bank financing.

The combined 2009 net written premiums for the two companies were $605 million. There is no overlap between the two organizations' agency networks, as Mercer Insurance primarily markets in six Western and mid-Atlantic states in which United Fire has no appointed property casualty agencies, the companies said in a release announcing the agreement.

No office closings are anticipated, Ramlo said.

'Mercer Insurance brings a strong, consistent performance track record, a disciplined underwriting approach and a history of product innovations well received by agents and policyholders. We look forward to working with the Mercer Insurance team to continue their focus on underwriting profitability,' Ramlo said.

When the deal closes, United Fire will market insurance through about 1,400 independent agents in 24 states.'We believe this is a very compelling transaction for all of our stakeholders. Our shareholders receive a good premium, our employees join a great organization and our agents and policyholders will benefit from increased opportunities and United Fire's strong capital position,' Andrew Speaker, president and CEO of Mercer Insurance, said in a release. 'I look forward to working with Randy and his team on transitioning Mercer Insurance to the next phase of its history.' The board of directors of Mercer Insurance unanimously approved the merger. Officers and directors of Mercer Insurance, who together own about 13 percent of the outstanding shares of the company's common stock, have agreed to vote their shares in favor of the merger.

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