Liberty looks to raise $1.4bn with New York agency listing
Liberty Mutual is looking to raise up to $1.41bn to repay debt by floating its agency business in New York - in what would be the biggest initial public offering (IPO) in the US so far this year.
The Boston-based insurer's subsidiary, Liberty Mutual Agency Corp, will list on the Nasdaq Global Select Market with the sale of as many as 70.73mn shares at between $18 and $20 per
Liberty Mutual Agency said in a US Securities and Exchange Commission (SEC) filing on September 13 that it would sell 64.3mn Class A shares.
At a mid-point offering price of $19 per share the net proceeds from the float are estimated at around $1.17bn. The funds raised are pencilled in to repay debt.
IPO underwriters have also been given the option to buy an additional 6.43mn shares in case of excess demand.
At the top end of the offering price, Liberty Mutual could raise as much as $1.41bn from the IPO.
Citigroup and Bank of America Merrill Lynch are joint book running managers for the IPO, with JP Morgan, Mitsubishi UFJ Securities and Wells Fargo Securities acting as joint lead managers.
Liberty Mutual will retain around 97.6 percent of the combined voting power of the outstanding common stock and 80.4 percent of total equity ownership if the over-allotment option is exercised in full.
Liberty Mutual also said in May that a stock market listing for its unit would boost its options to raise financing for growth and would be completed in the third quarter.
In May, Edmund Kelly, the then president, chairman and CEO of Liberty Mutual, said that a publicly traded subsidiary offered "access to public equity markets and increases financial flexibility". Kelly subsequently handed over the group president role to David Long in July, but retained his position as chairman and CEO.
The insurer's growth drive has included the acquisition of Safeco with its $5.6bn net writing premiums in 2008 and of the $1.4bn premium Ohio Casualty in 2007.
Pro forma debts as of 30 June stood at $1.48bn, with assets at $28.6bn and shareholder equity of $8.2bn.
Meanwhile, ratings agency AM Best has the insurer's A rating on negative outlook, based on what it says are deteriorating operating results and a modest level of capitalisation.
About $1.04bn of the proceeds will be used to repay the remaining $1.09bn outstanding on a $4bn note issued to parent Liberty Mutual in February with a two-year maturity. Some $130mn will repay a portion of a separate note issued to complete the transfer of Ohio Casualty.
Around $268mn will be used for working capital, payments of dividends, debt service, and other general corporate purposes at Liberty Mutual Agency.
In 2009, Liberty Mutual Agency booked $10.1bn of net written premiums through approximately 12,000 independent agencies, including $4.6bn from its commercial segment.
The commercial segment is the fifth largest writer of independent agency-distributed property and casualty insurance in the US, offering multiple peril, automobile, workers compensation, general liability and other risks to small-to-medium-sized businesses.