(Reuters) - Intact Financial Corp (IFC.TO), Canada's largest property and casualty insurer, said it would buy U.S.-based specialty insurer OneBeacon Insurance Group Ltd (OB.N) for $1.7 billion, creating a specialty insurer focused on small- and mid-sized businesses.
The $18.10 cash offer represented a 15.3 percent premium to OneBeacon's Tuesday close.
Shares of OneBeacon, controlled by White Mountains Insurance Group Ltd, were trading at the offer price in after-hours trading.
The deal will create an insurer with over C$2 billion ($1.46 billion) of annual premiums, the company said.
Intact said it plans to finance the deal and related expenses using a combination of C$700 million of equity financing, about C$700 million of excess capital and about C$1 billion of financing consisting of loans, notes and preferred shares.
OneBeacon's debt of about $275 million will remain outstanding, Intact said.
Goldman Sachs is the financial adviser for Intact, while Credit Suisse advised OneBeacon.
($1 = 1.3709 Canadian dollars)
Reporting by Arunima Banerjee in Bengaluru; Editing by Maju Samuel and Sriraj Kalluvila