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ACE agrees to buy Chubb, create larger global insurance company

In one of the largest-ever deals between insurance companies, ACE Limited has agreed to buy Chubb Corp. for $28.3 billion, creating a combined entity that promises to be one of the world’s biggest property-casualty insurers.

The combined operation will still use Chubb’s name but have its principal offices in Zurich, Switzerland, where ACE is located. The transaction is expected to close in the first quarter of 2016, pending regulatory and shareholder approval.

Chubb’s shareholders will receive a roughly 50-50 cash-stock split, with payouts of $62.93 in cash and a 0.6019 share of ACE Limited for each Chubb common share. Upon completion, ACE shareholders will control 70 percent and Chubb shareholders 30 percent of the combined entity, with Chubb holding four of 18 board seats.

“This is a combination occurring out of strength,” said Evan Greenberg, ACE’s president and CEO, in a conference call with investors. “We are both great on our own, but the complementary and compelling strategic nature of this combination is the opportunity to create so much more together. This is a growth story.”

The two insurers’ leaders emphasized that the companies complement each other and would create a whole greater than the sum of its individual parts. ACE is a global company, with operations in 54 countries, while Chubb, with operations in 25 countries, focuses more on the U.S.

“Where one of us is not present, the other is. Where one of us is strong, the other is even stronger,” Greenberg said.

With this complementary potential in mind, ACE approached the Warren, New Jersey-based Chubb in recent weeks with a proposal, and the deal came together relatively quickly.

“We weren’t shopping it. This was a proposal that came to us, and we thought it was a very good one,” said John Finnigan, Chubb’s president and CEO, who will become the new entity’s executive vice chairman for external affairs of North America.

Following the announcement on Wednesday, Chubb stock soared, increasing  by 26.12 percent in trading hours that day.