The $3.5 billion takeover of USF&G Corp. by Minnesota-based St. Paul Cos. will bring to an end more than 100 years of business history in Baltimore and deal another blow to the city's beleaguered economy.
The deal, in which stockholders in the Baltimore insurance company will receive about $22 a share for their holdings, could wipe out as many as 2,000 jobs. While executives of both companies said efforts will be made to preserve employment in Baltimore, St. Paul officials said they expect many of the cuts to be in Maryland.
"The combined organization . . . will continue to have a presence of some size in Maryland, but we don't know what size at this point," a St. Paul spokeswoman said.
A spokeswoman for USF&G said the cuts "are not going to be limited to Baltimore."
"The 1,500 to 2,000 {cuts} will be spread organizationally and nationwide," she said.
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USF&G has about 6,500 employees; St. Paul has more than 10,000.
The headquarters of the merged firm will be in St. Paul, with St. Paul Cos. chief executive Douglas W. Leatherdale as chairman and USF&G's chief executive, Norman P. Blake Jr., as vice chairman.
Share this articleShareThe sale, which would create the eighth-largest property-casualty insurance company in the country, with $36 billion in assets, places USF&G on a long list of well-known Baltimore firms that have failed or been sold and moved their headquarters away from the city in the past decade. Among them are Alex. Brown Inc., Monumental General Corp., MNC Financial Inc., CSX Corp. and Merry-Go-Round Enterprises Inc.
USF&G has struggled since an ill-fated diversification attempt in the late 1980s. The company, which is best known as a property-casualty carrier but also writes life insurance and specialty products, had sought to expand into other financial services as a buffer against the harsh cycles of the property insurance market.
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The effort did not succeed, however, and the company's stock, which had traded in the high $40s as late as 1987, fell to less than $6 in 1991. In 1990, the company lost more than $500 million, and its claims-paying ability was downgraded by some rating agencies.
The financial services arm was sold off, and Blake was brought in to attempt a turnaround.
Blake's efforts, which included a major reorganization, propelled the stock into the mid-$20s by last summer, though it had slipped recently. St. Paul is agreeing to pay a slight premium over Friday's price of $21.44. St. Paul also will assume about $700 million in USF&G debt.
The deal will expand St. Paul's reach geographically. The St. Paul-based company now isconcentrated in the Midwest, selling medical malpractice insurance as well as property coverage for businesses, while USF&G's similar business is concentrated in the South and Northeast.
The merger presumably would allow the resulting firm to operate more efficiently by combining claims processing and other administrative operations -- regarded by experts as a key impetus behind the deal. Both firms are widely regarded as too big to operate as niche players but not large enough to compete separately in the increasingly concentrated world of financial services.
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