| Provident Mutual Life Insurance Co. policyholders approved the sale of the company to Nationwide Financial Services at a price lower than the original $1.5 billion when the deal was first proposed. The proposed demutualization of the company was also approved by policyholders on Sept. 24, 2002.
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Demutualization is the process whereby an insurance company that is owned by policyholders converts to a stock company held by shareholders.
A sponsored demutualization is one in which a mutual company coverts to a stock company in order to be acquired by another stock company.
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Under the agreement, Provident Mutual policyholders would receive shares of Nationwide Financial stock, worth approximately only $1.2 billion at the time of the transaction under a formula based on Nationwide's stock price. That stock price--than at about $27--was low enough to trigger a clause to allow Provident to back out of the deal. About 93 percent of the Provident shareholders voting approved the sale, the company said. Nationwide Financial's stockholders approved the acquisition on Sept. 13, 2002.
"While it's true the stock price has dropped, we believe the strategic rationale for the transaction still exists," says Nationwide spokesperson Kevin O'Brien. With other regulatory approvals satisfied, the transaction was completed Oct. 1, 2002. According to Nationwide Financial, it would become the nation's third-largest provider of variable life insurance upon close of the deal.
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