Liberty Mutual subsidiary plans $1.4B IPO

BOSTON -- Insurer Liberty Mutual Group Inc. said Monday its subsidiary Liberty Mutual Agency Corp. plans to raise about $1.41 billion through the sale of more than 70 million shares of stock in an initial public offering.

The shares include 64.3 million shares of Class A stock to be sold publicly and 6.4 million shares granted to underwriters to cover excess demand.

The company, which had filed preliminary documents in May, updated the offering Monday revealing more detailed estimates of shares offered and price.

The company expects the initial public offering price to be between $18 and $20 a share.

Parent company Liberty Mutual Group will own no class A shares, but will own 295.7 million shares of class B stock, which represents about 97.9 percent of the combined voting power of the outstanding common stock and about 82.1 percent of total equity ownership. Liberty Mutual Group plans to maintain a controlling interest in the subsidiary.

Each class A share has one vote while class B shares have 10 votes per share, the company said in a regulatory filing.

Liberty Mutual Agency said it plans to pay quarterly cash dividend of 6 cents per share initially, beginning in the first quarter of 2011.

About $1.04 billion of the proceeds will be used to repay a portion of a $4 billion note issued to parent company Liberty Mutual in February 2010, which matures in February 2012. In addition, about $130 million will repay a portion of a note issued to Liberty Mutual before the closing of the offering to complete the transfer of Ohio Casualty to the company.

About $268 million will be used for working capital, payments of dividends, debt service, and other general corporate purposes at Liberty Mutual Agency Corp.

The company has applied to Nasdaq to have shares listed under the symbol "LMAC."