Bala Cynwyd insurer is sold
Philadelphia Consolidated Holding, around since the '50s, is to be bought by Tokio Marine Holdings for $4.4 billion cash
James J. Maguire had his first success in insurance by using sign language to sell life insurance to deaf people in the late 1950s.
Now, he is selling what he built into a publicly traded insurance company in Bala Cynwyd to a Japanese insurance giant for $4.4 billion in cash, one of the largest deals ever by a Japanese buyer in the United States, according to Standard & Poor's.
Tokio Marine Holdings Inc. said yesterday that it would pay $61.50 per share for Philadelphia Consolidated Holding Corp. The price is 73 percent more than the company's closing price Tuesday of $35.55.
Shares in the company, which specializes in niche products, such as insurance for adoption agencies, closed yesterday at $58.43, up 22.88. or 64 percent. The stock has risen an average of 17 percent annually for the last decade, compared with 2.7 percent for the Standard & Poor's 500-stock index.
"It's been a great experience to take the business from scratch, starting with my wife as my secretary," Maguire, 74, said in an interview yesterday. "I'm only mad about one thing. I wish I was 20 years younger."
Maguire said he has agreed to remain chairman for three years and will invest in Tokio Marine.
The sale of Philadelphia Consolidated is the second large deal this month involving a Philadelphia-area firm with large stock holdings still in the hands of a founding family. The other involved Rohm & Haas Co., which agreed to a $15 billion buyout by Dow Chemical Co. two weeks ago.
One thing that has not changed at Philadelphia Consolidated is family involvement. Four of Maguire's eight children work there, as well as a cousin and a son-in-law. The firm employs 600 in Bala Cynwyd and 1,400 at 47 offices nationwide.
Jamie Maguire, a son who is chief executive and has an employment agreement with Tokio Marine, said he expected business as usual - and faster growth. "Since Tokio Marine has such a small U.S. operation, it allows us to continue to run the company and be their platform for the U.S," the younger Maguire said.
Philadelphia Consolidated started looking for "potential partners" in February for help growing, particularly outside the United States, Jamie Maguire, 48, said. "We've always had our sights across the border," he said.
Other top executives have also agreed to stay on after the deal's close, expected in the fourth quarter. Both boards of directors have approved the deal, whose total value is $4.7 billion. It awaits approval by Philadelphia Consolidated shareholders.
The Maguire family, with 18 percent of Philadelphia Consolidated's shares, worth nearly $800 million at the sale price, has already said it would vote in favor of the deal, Tokio Marine said.
This has been a slow-growth period for insurance companies, which have been forced to consider merging in order to maintain premium growth and market share, experts said. Many deals are expected to cross international borders.
The weak dollar helps, but "it's . . . also a question of where someone like Tokio Marine can get growth," said Michael Costonis, a Philadelphia-based senior executive in Accenture's global insurance practice.
The United States is the largest market for property and casualty insurance in the world, according to Tokio Marine, which calls itself the largest property and casualty insurer in Japan.
John Swanick, senior managing director at Smart Business Advisory & Consulting L.L.C. in Devon, said the deal will be good for both companies by giving Tokio Marine a significant presence in the United States while Philadelphia Consolidated gets access to international markets.
Despite a new international bent, Jamie Maguire said Philadelphia Consolidated would continue sponsoring the Philadelphia Triathlon and other athletic events in the region.