Merger Tactics in Stalling Competition: The Liberty Mutual Way

 I believe Liberty Mutual made a low ball offer in attempts to slow down the orderly closing of the merger between Harleysville Group and Nationwide Mutual due to the condition needed to be satisfied before the merger can be completed also listed below:

•adoption of the Merger Agreement by the holders of a majority of the Company's issued and outstanding shares of common stock; 

•adoption of the Merger Agreement by the requisite votes of the respective members of each of Harleysville Mutual and Nationwide Mutual; 

•the absence of any legal prohibitions against the Mergers;

 

•all filings required for the Mergers have been made and all governmental approvals and consents required for the Mergers have been obtained; 

•no institution of any action by any governmental authority challenging or seeking to enjoin the consummation of the Mergers as well as early termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), which such notice of early termination was received on November 8, 2011; 

•no enactment, issuance, promulgation, enforcement or entry of any order or law by any governmental authority that would prevent or prohibit the consummation of the Mergers, and no institution or pendency of any action by any governmental authority seeking to restrain, prevent, materially delay or restructure the Mergers; 

•the representations and warranties of the Company, Harleysville Mutual, Nationwide Mutual, and Merger Sub shall be true and correct (subject to the applicable materiality standard), and each of them shall have complied with their covenants and agreements under the Merger Agreement in all material respects; 

•the Company and Harleysville Mutual having an aggregate statutory surplus in excess of $1,000,000,000 exclusive of any change in net unrealized capital losses since August 31, 2011, and an aggregate statutory surplus in excess of $900,000,000 (inclusive of any change in net unrealized capital losses); 

•Nationwide Mutual having a statutory surplus in excess of $11,100,000,000; 

•no Material Adverse Effect (as such term is defined in the Merger Agreement) having occurred with respect to the Company, Harleysville Mutual or their subsidiaries, taken as a whole, and no Harleysville Material Adverse Change (as such term is defined in the Merger Agreement) having occurred with respect to Harleysville Mutual and the Company; 

•no Material Adverse Effect having occurred with respect to Nationwide Mutual, Merger Sub and their subsidiaries, taken as a whole, and no material adverse change having occurred with respect to Nationwide Mutual; and 

•Michael L. Browne having entered into a retention bonus agreement with Nationwide Mutual.

Liberty Mutual claims that the deal between Harleysville Group and Nationwide Mutual will enrich executives at the expense of customers who own the parent. But customers cashed out when they IPO'ed in May 1986 reducing the percentage of outstanding shares owned by Harleysville Mutual to approximately 70% and later conducted a secondary offering in April 1992 further reducing the percentage of outstanding shares owned by Harleysville Mutual. They own approximately 53.5% of the company so IMO customers have had their slice of the cake already. The 53.5% is already in favor of the merger so with the increased spread the risk/reward is well compensated at a prices below trading around $56.50.

Disclaimer: The specific securities identified and discussed should not be considered a recommendation to purchase or sell any particular security. The commentaries are for informational and educational purposes only. Rather, these commentaries are presented solely for the purpose of illustrating my investment approach. These commentaries contain my views and opinions at the time such commentaries were written and are subject to change thereafter. Under no circumstances should a person act upon the securities mentioned without first consulting an investment adviser as to the suitability of such investments for his specific situation. These commentaries may include “forward looking statements” which may or may not be accurate in the long-term. It should not be assumed that any of the securities transactions or holdings discussed were or will prove to be profitable. Past performance is no guarantee of future results.