Motor Club of America and North East Insurance Co. Merger
17 March 1999
Motor Club of America and North East Insurance Company Reach Definitive Agreement PARAMUS, N.J. and SCARBOROUGH, Maine, March 17 -- Motor Club
of America , a property and casualty insurance holding company,
and North East Insurance Company , a property and casualty
insurer, today announced that they have signed a definitive agreement for MOTR
to acquire NEIC through a merger.
The terms of the agreement are as first announced on January 26, 1999
wherein NEIC shareholders will receive, at their individual election, (a)
$3.30 per share of NEIC common stock, (b) one share of MOTR common stock for
each 5.25 shares of NEIC common stock, or (c) a combination thereof. If the
NEIC shareholders in the aggregate elect to exchange more than 50% of their
shares for MOTR stock, the aggregate percentage will be ratably reduced to
50%.
Consummation of the merger is subject to the satisfaction of certain
conditions set forth in the merger agreement, including approval from the
shareholders of MOTR and NEIC shareholders and authorization by state
insurance regulators. Both MOTR and NEIC expect that these conditions will be
satisfied in due course.
Stephen A. Gilbert, President and CEO of Motor Club, said, "We are very
pleased to reach a definitive merger agreement with North East. We look
forward to working with Ron Libby and the Maine-based North East team once all
of the necessary regulatory and shareholder approvals are received. We
together believe that the merger will enable North East to enhance its
profitability and prospects by diversifying product offerings, reducing its
expense ratio and strengthening its distribution system."
The parties also announced that, upon effectiveness of the merger,
Ronald A. Libby will become President, Chief Operating Officer and a Director
of North East. Mr. Libby has been Chief Operating Officer of NEIC since
December 1994.
Ron Libby stated, "We have a partner in Motor Club which is committed to
maintaining North East as an independent operation with a Maine presence. Our
merger with Motor Club will only serve to strengthen our financial position
and ability to compete in Maine and the nearby region for both personal and
commercial lines business."
The conclusion of the merger will also mark the end of the direct
involvement of Robert G. Schatz, North East's President and CEO for the last
ten years. "North East's shareholders and policyholders are now able to look
at a solid organization as a result of Bob's leadership," stated Ron Libby.
"His efforts and vision have remade North East and enabled this merger to
proceed -- we all owe him a sincere debt of gratitude," Libby added.
Cochran, Caronia & Co. is serving as financial advisor to Motor Club of
America. Sandler, O'Neill & Partners, L.P. is serving as financial advisor to
North East.
Motor Club of America is a property and casualty insurance holding company
for Motor Club of America Insurance Company, which writes personal automobile
insurance, and Preserver Insurance Company, which writes small commercial and
homeowners insurance. Both subsidiaries are separately rated B+ (Very Good)
by A.M. Best, a widely recognized insurance rating and information service.
North East Insurance Company is a property and casualty insurer located in
Scarborough, Maine. North East is rated B- (Fair) by A.M. Best. Its common
stock has been publicly traded since 1981.
Forward-Looking Statement Disclaimer. This press release contains
statements that are not historical facts and are considered "forward-looking
statements" (as defined in the Private Securities Litigation Reform Act of
1995), including statements concerning the expected benefits of the merger and
the expected future satisfaction of conditions to consummation of the merger.
Consummation of the merger and future benefits therefrom involve various risks
and uncertainties, including the risk of material adverse changes in financial
markets or the condition of MOTR and NEIC; risks of the imposition of
unanticipated regulatory conditions to the merger; risks associated with
MOTR's and NEIC's entry into new markets; and state regulatory and legislative
actions which can affect the profitability of certain lines of business and
impede the companies' ability to charge adequate rates.
