St Paul and Travelers Property in $16bn merger deal

Two powerful former Citigroup executives yesterday were re-united in a $16 billion (€13.57 billion) agreed deal that merges The St Paul Companies and Travelers Property Casualty, creating the US's second-largest property and casualty insurer by market share.

Mr Jay Fishman, St Paul's chairman and chief executive, and Mr Robert Lipp, his counterpart at Travelers, both featured in the top echelons of Citigroup management until recently - Mr Fishman as one of two chief operating officers and Mr Lipp as head of Citigroup's consumer business.

Yesterday's merger agreement will place the two at the helm of a giant in the US commercial insurance business. The combined company, named The St Paul Travelers, will control total assets of $107 billion and a 7.6 per cent market share in commercial insurance, second only to AIG.

Mr Fishman, who will become chief executive of the combined group, and Mr Lipp, who will be chairman until he is succeeded by Mr Fishman in January 2006, are part of a Citigroup circle of executives known for their aptitude at combining companies.

Mr Lipp said the new company would have the credit rating and related financial strength to be a leading consolidator in a fragmented US market. "It creates a unique company," Mr Fishman said. "The product depth is really extraordinary. Geographically, the fit is remarkable."

The merger was well received by investors - unlike other large financial services deals in recent months such as Bank of America's takeover of Fleet-Boston and Manulife's takeover of John Hancock, where the acquirer's shares fell sharply on the day of the announcement. The deal means the volume of announced mergers and acquisitions this year, $442.3 billion, is greater than the volume of US mergers and acquisitions announced last year.

Under the terms of the deal, which is expected to close in the second quarter of 2004, Travelers class A and class B shareholders will receive 0.4334 St Paul shares for every Travelers share, valuing Travelers at $15.94 a share, a discount to Friday closes of $16.03 for class A shares and $16.06 for class B shares.