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DEFINITIVE AGREEMENT SIGNED; MADISON CAPITAL INC. TO MERGE INTO CITATION INSURANCE GROUP

 SAN JOSE, Calif., July 1 /PRNewswire/ -- Citation Insurance Group (NASDAQ: CITN) and Madison Capital Inc. today announced they have signed a definitive agreement to merge Madison Capital Inc. into Citation. An agreement in principle was announced on April 26.
 Donald D. Young, Citation's president and chief executive officer, said, "For several years, Citation's strategy has been to build a regional multi-line insurer operating in tightly-focused areas of market specialization. We have significantly expanded our commercial property and casualty business segment and focused our efforts on gaining admission to do business in other western states. By acquiring the Madison organization, we have accelerated this process."
 Madison is a privately held holding company which operates two insurance company subsidiaries, The Canadian Insurance Co. of California and California Consumers Insurance Co. Together, the two insurance subsidiaries are known as the California Consumers Insurance Group (CCIG). CCIG is rated B+ (Very Good) by A.M. Best Co. In addition, Madison owns Madison Acceptance Corp., a regulated premium finance company.
 CCIG writes only commercial property and casualty insurance and generated net premiums earned of $21.5 million in 1992. This compares with net premiums earned for Citation of $72 million, 85 percent in workers' compensation.
 Benefits of the Merger
 "The merger will provide Citation, our policyholders and our shareholders with a number of advantages including a better balanced book of business," Young explained. "On a pro forma basis, if our operations had been combined during 1992, commercial property and casualty premiums would have accounted for 34 percent of net premiums earned, up from 15 percent for Citation on a stand-alone basis. In addition, while we both have a very similar approach to the business, focusing on profitable select markets, we have complementary product lines with little overlap. For example, CCIG offers commercial automobile and umbrella liability coverages and specialty package programs for retail stores and other smaller businesses; areas we have considered but had not entered. And, because of our different product focus, our distribution networks do not overlap significantly. Therefore, when the combination is complete, each of the insurance subsidiaries will have access to a significantly expanded producer base.
 "The merger will accelerate our expansion into additional western states," Young continued. "Both organizations are licensed in California, Arizona and Nevada which will provide us more program and pricing flexibility in those states, a significant competitive advantage. In addition, Madison is already licensed in the state of Washington where Citation's application is pending.
 "Finally, we are excited to have Paul Bancroft joining the Citation management team. Paul has proven himself to be an energetic and insightful executive at Madison. He will be appointed as executive vice president and chief operating officer of Citation Insurance Group and Citation Insurance Co. He will remain president and chief executive officer of Canadian and Consumers," Young concluded.
 "We are enthusiastic about joining forces with Citation," said Bancroft. "Our philosophies and approach are similar. Our organizations and books of business will be highly complementary. And, we are convinced that a combined organization will result in increased shareholder value."
 Terms of the Agreement
 The terms of the agreement, which differ somewhat from the terms of the letter of intent, provide for the merger of Madison Capital Inc. into Citation Insurance Group, with Madison common stockholders to receive approximately 0.074 shares of Citation common stock and 11.5 cents for each share of Class A or B Stock they hold. Madison currently has 31,651,500 shares outstanding. Therefore, under the agreement Citation will pay approximately $3,650,000 and issue 2,335,000 shares to Madison shareholders. Citation's common stock is currently valued at approximately $8.75 per share, bringing the total value of the merger to approximately $24 million.
 For financial reporting purposes the merger will be recorded using the purchase method.
 The merger is subject to the approval of the California Department of Insurance, the approval of Citation's and Madison's shareholders, and other regulatory approvals and customary closing conditions. Three Madison directors will join Citation's board including James R. Bancroft, Paul M. Bancroft and Leslie W. Brown. Headquartered in San Jose, Citation Insurance Group is a regional multiple-line specialist operating in tightly-focused segments of the workers' compensation and commercial property and casualty marketplace, through its insurer subsidiary, Citation Insurance Co. Citation's common shares are traded on the NASDAQ National Market System, symbol: CITN. Citation Insurance Co. is rated B++ (Very Good) by the A.M. Best Co. The company has approximately 170 employees at offices in San Jose, Tustin, Sacramento, San Diego and Fresno, Calif.; Phoenix and Denver.
 Additional information can be obtained on Citation Insurance Group via FAX, at no cost. Dial 800-PRO-INFO, code no. 108.
 -0- 7/1/93
 /CONTACT: Dennis Pastirik of Citation Insurance, 408-292-0222; or Lise Needham of the Financial Relations Board San Francisco, 415-986-1591, for Citation Insurance/
 (CITN)


CO: Citation Insurance Group; Madion Capital Inc. ST: California IN: INS SU: TNM

TM -- SF004 -- 7543 07/01/93 09:01 EDT
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Date:Jul 1, 1993
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