Radian to be acquired by firm in Wis. Insurer Radian to be acquired, relocate to Wis.

Posted: February 07, 2007

Philadelphia-based mortgage insurer Radian Group Inc. said yesterday that it would be acquired by a competitor, move headquarters to Milwaukee, and cut local jobs in a deal creating the country's biggest private mortgage insurer.

Radian's acquisition by MGIC Investment Corp., in a stock transaction valued at $5.5 billion, will enable the combined company to reduce costs 24 percent and control more than a third of the U.S. mortgage-insurance market.

The acquisition follows consolidation in the home-mortgage business in the post-housing-boom period. It will bring together MGIC's mortgage-insurance operation with Radian's mortgage- and bond-insurance business under a new name, MGIC Radian Financial Group Inc.

"We like the deal," said Eric Wasserstrom, an analyst at UBS Securities L.L.C., which has been an adviser to Radian. "We think it brings together two complementary, strategic focuses."

Wall Street agreed. MGIC shares leaped 11 percent on the New York Stock Exchange to $70.09, up $7.16. Radian shares rose 9 percent to $66.51, up $5.67. The announcement even lifted the shares of at least one of their competitors, the PMI Group Inc.

Under the agreement, MGIC Radian Financial Group will keep its headquarters at MGIC's current offices in Milwaukee and will add jobs there, its officials said.

It will keep offices in Philadelphia, currently at 1601 Market St. in a 36-story building bearing Radian's logo. But it will reduce employment in Philadelphia, currently 570 people, the company said.

"Clearly, it was a difficult factor," said Radian's chief executive officer, S.A. Ibrahim. "Ultimately, in a world that is highly competitive, economics play out. There is no way to avoid it. I had to make a decision where the economics would play out for shareholders, fully realizing that we would deal with any consequences for people in a humane and dignified and fair manner."

Ibrahim and MGIC's CEO, Curt S. Culver, declined to specify the number or type of jobs to be cut, saying only that the merger would eliminate "redundancies." They committed to keep paying all Philadelphia employees at least through the end of 2007.

Analysts speculated that most of the cuts would occur in Radian sales positions, since that is where the companies overlap the most.

"I look at this as building jobs in the long-term, not losing them," Culver told reporters in a conference call. "The transaction is all about making both companies better, which leads to increased employment opportunities."

People who lose jobs in Philadelphia may be eligible for positions in Milwaukee, Culver said.

At the same time, the new company will maintain or expand offices in Canada, Australia and elsewhere abroad.

"Internationally, this is a godsend for both of us," Culver said. "We have terrific opportunities in Australia, Canada, Hong Kong and other places. We are going to incur significant expenses doing this."

MGIC is slightly larger than Radian. It employs about 1,200 worldwide and reported 2006 net income of $564.7 million on revenue of $1.47 billion. Radian employs about 1,079 people and reported 2006 net income of $582.2 million on revenue of $1.33 billion.

The agreement provides each Radian share to be exchanged for 0.9658 shares of MGIC common stock. At yesterday's closing, that put the merger value at $5.46 billion.

The merged company will have $15 billion in total assets and more than $290 billion of primary mortgage insurance in force. Because of their overlapping business, the combined company will have $12 billion less in revenue than they had individually.

Under the agreement, Culver will serve as CEO until 2009 and chairman until 2010. He will be succeeded in both roles by Ibrahim, who will serve until then as chief operating officer and president.

Contact staff writer Thomas Ginsberg at 215-854-4177 or tginsberg@phillynews.com.

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