Subsequent Events

12 Months Ended

Dec. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

Note U – Subsequent Events

Proposed Merger with The Progressive Corporation

Merger Agreement

On February 14, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with The Progressive Corporation, an Ohio corporation (“Progressive”), and Carnation Merger Sub Inc., an Indiana corporation and wholly-owned indirect subsidiary of Progressive (“Merger Sub”).  The Merger Agreement provides for, subject to the satisfaction or waiver of specified conditions, the merger of Merger Sub with and into the Company (the “Merger”), whereupon the separate existence of Merger Sub will cease and Protective will continue as the surviving corporation and as a wholly-owned indirect subsidiary of Progressive.

The Company's Board of Directors (the "Board"), at the unanimous recommendation of the Special Committee of the Board, unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable and fair to, and in the best interests of, the Company and its shareholders, and approved, adopted and declared advisable the Merger Agreement and the transactions contemplated thereby. The Merger is expected to close prior to the end of the third quarter of 2021.  At the effective time of the Merger, each issued and outstanding share of common stock, without par value, of the Company (other than each share of the Company’s common stock that is owned by the Company as treasury stock or by any subsidiary of the Company and each share of the Company’s common stock owned by Progressive, Merger Sub or any other subsidiary of Progressive immediately prior to the effective time of the Merger) will be automatically canceled and converted into the right to receive $23.30 in cash, without interest for a total transaction value of approximately $338 million.

The Merger Agreement contains various customary representations and warranties from each of the Company, Progressive and Merger Sub.  The Company has also agreed to various customary covenants, including but not limited to conducting its business in the ordinary course and not engaging in certain types of transactions during the period between the execution of the Merger Agreement and the closing of the Merger.  However, the Merger Agreement permits the Company to continue to pay regular quarterly dividends not to exceed $0.10 per share of the Company’s common stock. The Merger is subject to certain conditions, including approval of the Merger by the Company's Class A shareholders, legal and regulatory approvals including from the Indiana Department of Insurance and the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as other customary closing conditions.

Voting and Support Agreement

On February 14, 2021, the Company also entered into a Voting and Support Agreement (the “Voting Agreement”) with Progressive and certain of the Company's shareholders. The Voting Agreement requires that the Company shareholders party to the Voting Agreement: (i) appear at the meeting of the holders of the Company's Class A common stock to consider resolutions to approve the Merger Agreement and the Merger or otherwise cause their shares of the Company's common stock to be counted as present for purposes of calculating a quorum, and (ii) vote their shares (a) in favor of the adoption of the Merger Agreement, the Merger and the other transactions contemplated thereby and any action reasonably requested by Progressive or the Board in furtherance of the foregoing, (b) against any action or agreement that would result in a material breach of any covenant, representation or warranty or other obligation or agreement of the Company contained in the Merger Agreement and (c) against any takeover proposal or superior proposal (provided, that if the Board changes its recommendation with respect to the Merger, any shares of Class A common stock owned by such shareholders in excess of approximately 35% of the outstanding shares of Class A common stock will be voted in the same proportion as those shares of Class A common stock voted by the holders of the Company’s Class A common stock that are not party to the Voting Agreement).

There can be no assurance that the Merger will occur or, if it does occur, of its terms or timing.  For additional information regarding the risks associated with the Merger, please see Part I, Item 1A, "Risk Factors," of this Annual Report on Form 10-K.

Dividends

On February 22, 2021, the Company's Board of Directors declared a regular quarterly dividend of $0.10 per share on the Company's Class A and Class B Common Stock.  The dividend per share will be payable March 10, 2021 to shareholders of record on March 5, 2021.