Motor Club Of America To Acquire North East Insurance

Motor Club of America, a property and casualty insurance holding company, and North East Insurance Co., a property and casualty insurer, say they have reached a non-binding agreement in principle for Motor Club to acquire North East through a merger.

The agreement provides that North East shareholders will receive, at their individual election, (a) $3.30 per share in cash per common share of North East, (b) one common share of Motor Club for each 5.25 shares of North East common, or (c) a combination thereof. If shareholders in the aggregate elect to exchange more than 50% of their shares for Motor Club stock, there will be a proration mechanism to reduce the aggregate percentage to 50%.

The agreement in principle is subject to customary conditions, including negotiation, execution and delivery of a definitive merger agreement, and mutually satisfactory due diligence and documentation. Among other conditions, the transaction would also require state regulatory approvals, final approval by the Boards of Directors of both companies, and approval by the vote of both companies' shareholders.

Stephen A. Gilbert, president and CEO of Motor Club of America, said, "We believe the transaction with North East offers our company an excellent opportunity to begin the successful execution of our strategy to diversify outside the State of New Jersey. It also provides North East shareholders with the opportunity to share in the future success of the combined companies going forward. We feel this transaction will enhance North East's results while enabling it to retain its unique identity. We look forward to working with the employees and agents of North East in building a prosperous future for both companies."

North East President Robert G. Schatz said, "This transaction offers our shareholders a significant premium for their shares and offers our policyholders and agents the advantages of affiliation by North East with a larger and stronger insurer."

The companies anticipate entering into a definitive merger agreement in the near future. Under that agreement, North East would become a wholly-owned subsidiary of Motor Club of America, thereby joining the ranks of Motor Club of America Insurance Company and Preserver Insurance Company.

Although controlled by new owners, North East's operations will continue to be managed locally. Gilbert said, "We have been very impressed with the quality of North East's management team and employees. We expect job loss to be minimal and hope that North East employees will choose to remain with us after the acquisition. In particular, as part of this transaction, we are pleased to confirm that Ronald A. Libby would stay on as chief operating officer of North East. From the standpoint of policyholders and agents, this merger should assure a stronger and better-rated North East."

In connection with this transaction, North East announced that it has terminated the rights offering to its shareholders for common stock of the company.