Donegal Group Inc. Announces Sale of Donegal Financial Services Corporation
12 Juin 2018 - 2:30PM
Donegal Group Inc. (NASDAQ:DGICA) (NASDAQ:DGICB) announced today
that Donegal Group Inc. (“DGI”) and Donegal Mutual Insurance
Company (“DMIC”) have entered into an agreement to sell Donegal
Financial Services Corporation (“DFSC”) and its wholly owned
subsidiary, Union Community Bank, to Northwest Bancshares, Inc.
(“Northwest”) for approximately $85.0 million in a combination of
cash and Northwest common stock (NASDAQ:NWBI). Immediately prior to
the closing of the merger, DFSC will pay a dividend of
approximately $30.0 million to DGI and DMIC. Thus, the total
proceeds to DGI and DMIC will be approximately $115.0 million.
Under the terms of the agreement, Northwest’s payment will be
50% cash and 50% stock, with the stock portion consisting of a
fixed exchange of 137.84 Northwest shares for each of DFSC’s 17,864
outstanding shares. The exchange ratio was based upon the
average per share closing price of Northwest’s stock for the ten
trading days ended June 4, 2018, which was $17.26. The
agreement provides that the exchange ratio will switch to a
floating basis if the value of Northwest’s shares during a period
ending the fifth trading day prior to closing is less than $15.53
or greater than $18.99, in an effort to provide protection to all
parties such that the total purchase price shall not be less than
$80.75 million or more than $89.25 million. Northwest also
has the right to alter the mix of cash and stock to be received if
the value of Northwest’s shares during the calculation period is
less than $15.53.
As the owner of 48.2% of DFSC’s common stock, DGI will receive a
dividend payment from DFSC of approximately $14.5 million and
consideration from Northwest that will range in value from $38.9
million to $43.0 million. DGI anticipates that it will
realize an after-tax gain, net of transaction-related expenses,
within a range of $8.9 million and $12.5 million, or approximately
$.32 to $.45 per Class A common share, upon closing of the
transaction. Subject to receipt of various regulatory approvals and
satisfaction of other customary closing conditions, the parties
anticipate that the transaction will close during the first quarter
of 2019.
Kevin G. Burke, President and Chief Executive Officer of Donegal
Group Inc. commented, “For DGI, this transaction represents the
culmination of a banking investment strategy that began with the
formation of Donegal Financial Services Corporation in 2000. The
gain DGI will realize upon the closing of the transaction
represents a favorable outcome for our stockholders. We
anticipate that we will utilize the proceeds to support our
strategic goals as we focus on our core property and casualty
insurance business.”
Mr. Burke continued, “We believe that the transaction with
Northwest will provide significant opportunities for the customers
and employees of Union Community Bank. Northwest plans to
expand its presence in Lancaster County, Pennsylvania and beyond.
While the greater size and capabilities of Northwest will allow it
to provide our banking customers with a greater range of products
and services, Northwest continues to maintain a community banking
culture that is similar to the customer-focused approach that Union
Community Bank has followed for many years.”
Keefe, Bruyette, & Woods, Inc., a Stifel Company, served as
financial adviser to DMIC, who is the majority shareholder of DFSC
and Duane Morris LLP served as legal counsel to DGI and DMIC, who
are DFSC's two shareholders.
Ambassador Financial Group, Inc. served as financial advisor and
Luse Gorman, PC served as legal counsel to Northwest.
About the Company
Donegal Group Inc. is an insurance holding company whose
insurance subsidiaries offer personal and commercial property and
casualty lines of insurance in 22 Mid-Atlantic, Midwestern, New
England and Southern states. Donegal Mutual Insurance Company
and the insurance subsidiaries of Donegal Group Inc. conduct
business together as the Donegal Insurance Group. The Donegal
Insurance Group has an A.M. Best rating of A (Excellent).
The Company’s Class A common stock and Class B common stock
trade on NASDAQ under the symbols DGICA and DGICB, respectively. As
an effective acquirer of small to medium-sized “main street”
property and casualty insurers, Donegal Group Inc. has grown
profitably over the last three decades. The Company continues to
seek opportunities for growth while striving to achieve its
longstanding goal of outperforming the property and casualty
insurance industry in terms of service, profitability and book
value growth.
Safe Harbor
We base all statements contained in this release that are not
historic facts on our current expectations. These statements are
forward-looking in nature (as defined in the Private Securities
Litigation Reform Act of 1995) and involve a number of risks and
uncertainties. Actual results could vary materially. Factors that
could cause actual results to vary materially include: the
conditions to the completion of the transaction may not be
satisfied, or the regulatory approvals required for the transaction
may not be obtained on the terms expected, on the anticipated
schedule, or at all; closing of the transaction may not occur or
may be delayed, either as a result of litigation related to the
transaction or otherwise; the occurrence of any event, change or
other circumstance that could give rise to the termination of the
merger agreement; the price volatility in the trading price of
Northwest’s common stock and other risks we describe from time to
time in the periodic reports we file with the Securities and
Exchange Commission. You should not place undue reliance on any
such forward-looking statements. We disclaim any obligation to
update such statements or to announce publicly the results of any
revisions that we may make to any forward-looking statements to
reflect the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements.
For Further Information:Jeffrey D. Miller Executive Vice
President & Chief Financial OfficerPhone: (717)
426-1931E-mail: investors@donegalgroup.com
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