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Markel bolsters tech, underwriting capabilities with State National acquisition

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Markel Corp. will acquire State National Companies Inc. in a transaction valued at about $919 million.

Richmond, Virginia-based insurer and reinsurer Markel will acquire all of the outstanding shares of Bedford, Texas-based State National common stock for $21 per share in cash, according to a statement released by the companies Wednesday. 

The agreement, which has been unanimously approved by both companies' boards of directors, represents a 38% premium to State National's 30-day volume-weighted average stock price as of May 18, the last trading day prior to published market speculation regarding a potential sale of State National, and a premium of about 7% to State National's closing stock price on July 25, according to the statement. 

State National, a specialty provider of property and casualty insurance services, has a pure-play U.S. insurance fronting business with about $1.3 billion in gross written premium in 2016 and more than 60 programs, and also provides collateral protection insurance in the United States. 

“Strategically, State National will help us to leverage our Insurtech and digital distribution initiatives, diversify our underwriting and fee-based portfolios and revenue streams and add to Markel's third-party capital capabilities,” Richard Whitt, Markel's co-chief executive officer, said in the statement. 

The transaction, which is subject to approval of a majority of State National shareholders and state insurance regulators, is expected to close in the fourth quarter of 2017. Members of the founding Ledbetter family have entered a voting agreement with Markel in support of the merger and CF SNC Investors L.P. entered a separate similar voting agreement with Markel, meaning that about 37% of State National's common stock is committed to vote in favor of the transaction, according to the statement. 

The transaction is not subject to any financing condition and Markel plans to finance the transaction using cash balances on hand. 

State National will operate as a separate business unit upon completion of the transaction. The management team, led by current Chairman and Chief Executive Officer Terry Ledbetter, will remain in place and will continue to be based in Bedford.

Sidley Austin L.L.P. is serving as legal counsel to Markel while Evercore is serving as exclusive financial adviser and Skadden, Arps, Slate, Meagher & Flom L.L.P. is serving as legal counsel to State National.

Oldwick, New Jersey-based A.M. Best Co. said the Long-Term Issuer Credit Rating of BBB of State National remains positive and the outlook for the Financial Strength Rating of A (Excellent) remains stable, according to a statement issued on Wednesday.