Fosun International Limited, a leading Shanghai-based investment company, has recently entered into an agreement to acquire Meadowbrook Insurance Group, Inc. (MIG). The purchase consideration of the deal stands at $433 million or $8.65 per share.
This price is 24% higher than the $6.97 closing price of the shares of Meadowbrook as of Dec 29, 2014. This is also 1.4x the tangible book value per share of Meadowbrook as of Sep 30, 2014. The acquisition is expected to close in the second half of 2015. However, post-acquisition, Meadowbrook will retain its headquarters in Southfield, MI and continue to operate under the brand name “Meadowbrook”.
The combination of Meadowbrook with Fosun fortifies the capital base of the former thereby helping the same to improve its underwriting performance and drive profitability. The aforementioned deal is not only expected to optimize shareholder value but also provide more opportunities for Meadowbrook’s employees as they will become a part of a larger global organization. Additionally, the customers, partners and policyholders of Meadowbrook will be benefited through the creation of a far more robust specialty risk, insurance and service provider.
The acquisition will also mark Fosun’s foray into U.S. property and casualty insurance market, thereby further strengthening its insurance business.
Meadowbrook’s operating performance has been weak over the past couple of quarters. Last month, the company reported third quarter 2014 earnings that not only missed the Zacks Consensus Estimate but also declined year over year. Notably this multiline insurer delivered negative earnings surprises in three of the last four quarters with an average miss of 85.83%.
Meadowbrook currently carries a Zacks Rank #5 (Strong Sell). Better-ranked stocks worth consideration include CNO Financial Group, Inc. (CNO), FBL Financial Group Inc. (FFG) and American International Group, Inc. (AIG). While CNO Financial and FBL Financial sport a Zacks Rank #1 (Strong Buy), American International holds a Zacks Rank #2 (Buy).
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