CHATTANOOGA, Tenn. -- Provident Cos. said yesterday that it will buy Paul Revere Corp., a rival disability insurer, from Textron Inc. in a transaction valued at $1.2 billion.
Zurich Insurance Co., a Swiss insurer, will help pay for the purchase by taking a 15 percent stake in Provident for about $300 million.
The acquisition will create the largest U.S. insurer of individuals against loss of income from debilitating illnesses or accidents. It's also the latest step in Provident's effort to reorganize and expand.
"This clearly indicates that Provident has gone from defensive to offensive," said Robinson-Humphrey Co. analyst Thomas Rosencrants. "Provident was a close second in sales of individual disability coverage to Paul Revere, so this will let it dominate that market."
Textron will sell its 83 percent stake in Paul Revere to Provident for about $975 million, or $26 a share in cash and stock.
The sale is part of Providence, R.I.-based Textron's efforts to shed financial services units and focus on core manufacturing businesses, which include making Cessna aircraft, Bell helicopters and E-Z-GO golf carts. Paul Revere has been a laggard among Textron's six operating units, particularly among its finance-oriented businesses.
At least 12 percent, or 600, of the 5,100 jobs in the combined insurance company may be eliminated, said Provident Chairman J. Harold Chandler.
Shares of Worcester, Mass.-based Paul Revere closed at $25.875, down 12.5 cents yesterday. That's up from $24.25 before the start of trading Wednesday, when the first reports of TC possible sale surfaced.
Provident stock rose $2.50 to $34 and Textron shares fell $1 to $86.125.
Zurich's stake gives Provident a potential international outlet for sales, Mr. Chandler said. Zurich will receive two Provident board seats.
The move by Zurich comes after the company bought Kemper Corp. for $2 billion last year and boosted its U.S. insurance business. Zurich also increased its stakes in its own U.S. subsidiaries in recent months in a bid to boost its business in the United States.
The purchase, which is expected to be completed in the third quarter, will result in about $70 million annually in cost cuts, Mr. Chandler said, and will add to Provident's earnings starting next year.
Pub Date: 4/30/96