Nationwide to Acquire Zenith Unit

Nationwide Mutual Insurance Co. agreed to pay Zenith National Corp. $272 million for its CalFarm Insurance Co. unit, a deal that would make it the largest insurer of California’s farm owners.

The all-cash purchase of the Sacramento-based Zenith subsidiary would give Nationwide ties to 350 property and casualty insurance agents in California. It is expected to close by the end of June.

Nationwide, the fourth-largest insurer of U.S. homes and automobiles, sees the proposed purchase as “another solid step” in its expansion in Western states, including California, said Richard Crabtree, Nationwide’s president and chief operating officer.

Columbus, Ohio-based Nationwide boosted its Western business with a 1997 purchase of TIG Holdings’ personal insurance unit and last year’s acquisition of Allied Group Inc.

For Zenith, the sale fits into a plan to focus on the workers’ compensation business, said Chairman Stanley Zax. The Woodland Hills-based company said it expects a gain of $100 million, or $5.84 a share, on the transaction.

Nationwide is also focusing on its connections to state farm bureaus and other agricultural organizations that endorse it. The purchase would make Nationwide the preferred source of insurance for the 78,000 members of the California Farm Bureau Federation.

Nationwide is endorsed by farm bureaus in Ohio, Maryland and Pennsylvania and by Farmland Industries, the Southern States Cooperative and the Cenex Harvest States Cooperatives.

Zenith was advised by Credit Suisse First Boston in the negotiations.

Shares of Zenith gained 63 cents to close at $23.19 on the New York Stock Exchange, leaving investors with a 10% loss for the last 12 months. Nationwide is a mutual insurance company owned by policyholders rather than investors.