Switzerland-based insurer Helvetia is to buy Nationale Suisse in a cash-and-shares deal worth about CHF1.8bn ($2bn). The deal, which is being backed by the Nationale Suisse board, will create Switzerland's third-largest insurer in terms of premiums written.
Helvetia said that the merged company would have annual premiums of about CHF9bn. Cost savings of between CHF100m and CHF120m were predicted by Helvetia.
Helvetia will pay CHF52 a share in cash, along with 0.068 Helvetia shares for each Nationale Suisse share.
It is effectively bidding for 81% of the shares, as a 19% stake is owned by the Helvetia and Patria cooperative.
Nationale Suisse said: "There were specific disadvantages in terms of difficulties in day-to-day business, conflicts of interest among shareholders and ongoing takeover speculations with the resulting insecurity these provoked, particularly among staff. The Board of Directors therefore decided to enter into a structured dialogue with potential partners."
Nationale Suisse said that "the foreign activities of Helvetia and Nationale Suisse complement each other ideally". It also noted that Nationale Suisse Specialty Lines operation would continue as an independent business, but that it would be "sustainably strengthened through the integration of selected business lines from Helvetia". David Ribeaud will be head of the new Specialty Lines business area. He will become a member of the Helvetia Group's management.
The Specialty Lines unit will bring together marine/transport insurance, engineering, art and the active reinsurance divisions of Helvetia and Nationale Suisse. That includes the current Helvetia France. The new enlarged operation will have premium volume of about CHF1bn a year.
The life business and international specialty lines will be managed from Basel. A regional non-life hub will also be created in Basel.
Nationale Suisse's current management team "will mostly be integrated within the new organisation".
Andreas von Planta, Balz Hösly, Peter A. Kaemmerer and Gabriela Maria Payer from Nationale Suisse will become members of the Board of Directors of Helvetia. Furthermore, Hans Künzle will hold the post of second Vice-Chairman of the Board of Directors.
Andreas von Planta, Chairman of Nationale Suisse's Board of Directors, said: "Once it became clear that the structure of our core shareholders was not sustainable and our commercial development could suffer as a result, we decided to enter into a structured dialogue with selected parties. At the end of a systematically managed selection process, we in the Board of Directors unanimously agreed on recommending to our shareholders that they take up the offer from Helvetia."
The companies said that, taking into account the natural attrition rate of around 5% to 10% a year, "a considerable part of the personnel-related efficiency gains in the coming two to three years can be achieved by not replacing staff". The companies added: "If structural redundancies lead to further job cuts, these situations will be dealt with in a way that is fair and socially acceptable."
National Suisse shares soared on news of the deal, up 25% to just shy of CHF80. Helvetia shares declined slightly, down 1.4% to CHF406.
Helvetia is an all-lines insurer with annual premiums of about CHF5bn. The Swiss market will remain the main pillar of the merged group, with a balance of life and non-life business.