Shares of Assurant Inc. ticked higher Friday, after the New York-based insurer announced plans to acquire General Electric Co's warranty management group, which sells warranties for major appliances and consumer electronics.
Shares gained 88 cents to $57.86 in afternoon trading. The stock has fallen 19 percent since peaking at a 52-week high of $71.31 in July and is down 14 percent so far this year.
Assurant will pay GE $140 million in cash for the sale and transfer of certain assets and will assume certain liabilities. GE will pay Assurant $115 million in cash in return for Assurant assuming some debts.
Assurant also said late Thursday it signed a 10-year agreement to market extended warranties and service contracts on GE-branded major appliances in the United States.
Citi Investment Research analyst Keith F. Walsh said the deal is a "natural fit," and cements the companies' alliance, which dates back to 2003. He notes that Assurant has spent $335 million so far in 2008 on acquisitions, but with such robust cash flow, there is plenty of capacity for an upcoming larger deal without needing to raise equity.
Goldman Sachs analyst Thomas V. Cholnoky said the acquisition, which is really costing Assurant just $25 million, should enhance the company's extended warranty and service contract business. The company's string of transactions this year has solidified its strong capital position, he wrote in a note to investors, and should aide management in ultimately reaching its return-on-equity targets.