October 11, 2012 (Update) -- $26 million settlement proposed to end the litigation brought on behalf of former Harleysville Mutual shareholders, who claimed that the company’s directors enriched themselves as part of the merger.
San Diego, Oct. 07, 2011 (Shareholders Foundation) -- An investor in Harleysville Group Inc. (NASDAQ:HGIC) filed a lawsuit in effort to stop the proposed takeover of Harleysville Group by Nationwide Mutual Insurance Company at $60 per HGIC share.

According to the complaint the plaintiff alleges that the defendants breached their fiduciary duties arising out of the attempt to sell Harleysville Group Inc too cheaply via an unfair process to Nationwide Mutual Insurance Company.

On September 29, 2011, Nationwide Mutual Insurance Company and Harleysville Mutual Insurance Company and Harleysville Group Inc.(NASDAQ:HGIC) announced that they have entered into an agreement under which Harleysville will combine with Nationwide. Under the terms of the agreement, Harleysville Mutual Insurance Company policyholders will become policyholders and members of Nationwide Mutual Insurance Company, and Nationwide Mutual Insurance Company will acquire all of the publicly held shares of common stock of Harleysville Group Inc. for $60.00 per HGCI share in cash.

However, in connection with the merger of Harleysville Group, Harleysville Mutual Insurance Company has already entered into a voting agreement with Nationwide Mutual Insurance Company under which it has agreed to vote its 54% interest in Harleysville Group Inc.(NASDAQ:HGIC) in favor of the merger.

The plaintiff claims that the $60offer undervalues Harleysville Group Inc and ignores Harleysville Group 's growth potential. In fact, Harleysville Group’s financial performance over the past four years has been relatively consistent. Its annual Revenue ranged over the past four years from $962.01million to lately $986.27million and its Net income ranged from $42.32million to $100.05million.