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ACE Group eyes $5.3 billion of new debt to fund Chubb acquisition
By Lisa Kerner
Charlotte, N.C., July 1 – ACE Group Ltd. announced it will acquire Chubb Corp. in a cash-and-stock transaction valued at $28.3 billion and will issue debt to help fund the acquisition.
“The cash consideration is a combination of $9 billion of cash on hand between both companies and $5.3 billion of new long-term debt,” ACE chairman and chief executive officer Evan G. Greenberg said on Wednesday during a conference call to discuss the transaction details.
The new debt includes new senior notes with a range of maturities to be determined. The expected cost of debt is expected to be around 3½%, according to ACE.
Executives on the call clarified that the cash on hand coming from both companies includes undeployed capital.
ACE is targeting a debt-to-total capital ratio of about 20% following the acquisition, within the guidelines for the company’s ratings.
Under the terms of the definitive agreement between the two companies, Chubb shareholders will receive $62.93 per share in cash and 0.6019 shares of ACE stock.
“Regarding the stock consideration, we will be issuing 137 million shares of ACE to Chubb’s shareholders with a fixed exchange ratio of 0.6019 shares for each Chubb share based on ACE’s closing price yesterday [June 30] of $101.68, which I consider cheap,” Greenberg said.
The transaction is expected to close during the first quarter of 2016.
ACE was advised by Morgan Stanley & Co. LLC. Guggenheim Securities, LLC advised Chubb.
Based in Zurich, ACE Group is one of the world’s largest multiline property and casualty insurers.
Chubb is a holding company for a property and casualty insurance company based in Warren, N.J.
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