The insurance industry will be a center of trading attention today following the news that French company AXA Group (AXAHY 31.24) has entered an agreement to acquire Bermuda-based XL Group (XL 43.30) for $15.3 billion, or $57.60 per share, in cash.
The offer price represents a 33% premium over XL's closing price on Friday, which is a handsome premium.
If the merger is approved by shareholders and regulators, AXA Group will emerge as a predominantly property and casualty and will occupy the leading position in commercial lines based on gross written premiums.
The deal is seen by AXA Group as a way to shift its business model, expand its geographic reach, and reduce its sensitivities to financial markets.
The transaction, which is expected to close during the second half of 2018, will be financed with cash on hand, proceeds from the planned IPO of AXA's U.S. operations, and subordinated debt.
AXA expects the merger to result in approximately $400 million of cost synergies.
Publicly-traded companies that compete with XL Group include the likes of Chubb (CB 139.86), Arch Capital (ACGL 86.14), RenaissainceRe Holdings (RNR 126.29), Everest Re Group (RE 239.00), and Berkshire Hathaway (BRK.B 201.34).
XL also competes with Validus Holdings (VR 67.57), which entered into an agreement in January to be acquired by American International Group (AIG 56.51).