Allstate Corp. sold $2.12 billion of stock today in the biggest initial public offering ever by a U.S. company.
Allstate, a unit of Sears, Roebuck & Co., sold 78.5 million common shares at $27 each, representing a 17.9% stake in the company. Underwriters have the option to sell an additional 11 million shares.
The insurer was able to sell the shares at the high end of its expected range as investors lined up to buy into one of the biggest names in the property and casualty business.
“There was so much demand out there for this issue that (a price of) 27 did not seem to be too bad,” said Jeremy Conlin of the $13-billion Tennessee Consolidated Retirement System.
The pension fund expects the stock to rise to $32 to $34 within 18 months, he said.
At $27, the company’s shares are inexpensive compared with its main competitors, analysts and investors said.
Allstate originally filed with the Securities and Exchange Commission in March to sell the shares at $24 to $27 each.
Allstate’s IPO moves past Consolidated Rail Corp.'s $1.645-billion offering in 1987 to become the largest ever by a U.S. company, according to Securities Data Co.
The Northbrook, Ill.-based insurer will use proceeds from the stock issue to repay $1.54 billion in debt and provide $350 million in capital to Allstate Insurance Co., its operating subsidiary.
The offering boosts the 62-year-old company’s capital, which was depleted last year by the most costly series of catastrophes in insurance history.
Allstate, the nation’s second-largest property insurer and 14th-biggest life insurer, suffered a $1.65-billion loss because of Hurricane Andrew in August.
Earlier this year, Allstate threatened to drop 300,000 Florida homeowner policyholders to reduce exposure to future hurricanes. Allstate suspended the controversial plan last week as the Florida Legislature prepares to vote on a proposed six-month moratorium on all policy cancellations.
Allstate’s offering was popular with investors in part because it has a widely recognized franchise and a nationwide network of 15,000 agents.
Allstate earned $320.1 million in the first quarter, compared to a year-earlier loss of $70.1 million.
Its operating profit rose 25% to $320.1 million, or 75 cents a share. Revenue for the quarter rose to $5.12 billion from $5 billion a year ago.
Sears sold shares in the insurance subsidiary as part of its plan to leave the financial services business and to cut its debt by $3 billion. The insurer also plans to sell $600 million of bonds soon after the stock sale is completed.