Liberty Mutual agrees to buy Safeco

Liberty Mutual Group has agreed to acquire publicly traded Safeco Corp. and take it private in an all-cash, $6.2-billion deal to create the nation’s fifth-largest property and casualty insurer.

Boston-based Liberty Mutual and Seattle-based Safeco said the boards of both companies approved the deal, which is subject to approval by Safeco shareholders as well as regulators.

Liberty Mutual, which is owned by its policyholders, offered $68.25 a share for Safeco, a 51% premium to Safeco’s Tuesday closing price of $45.23.

On Wednesday, Safeco’s shares soared $20.71, or 46%, to $65.94.

The transaction, which Liberty Mutual said is subject to no financing conditions, is expected to close by the end of the third quarter.

Liberty Mutual ranks as the nation’s No. 6 property and casualty insurer, based on its $20.2 billion in insurance policies sold last year including automobile and homeowner’s coverage, compared with Safeco’s $5.9 billion.

In addition to providing personal coverage, Liberty Mutual offers commercial insurance to large businesses, some of them overseas. Safeco’s focus is on coverage for individuals and small- to medium-size businesses, primarily in the West, in contrast to Liberty Mutual’s stronger presence in the East.

Once the transaction is completed, Safeco would become part of Liberty Mutual’s Agency Markets business unit, which posted $5.6 billion in revenue last year.