A multiline mutual insurer has announced plans to reacquire all of the stock of a financial services affiliate that has been publicly traded since March 1997.

Nationwide Mutual Insurance Company, Columbus, Ohio, has sent shareholders of the affiliate, Nationwide Financial Services Inc., Columbus, an offer to buy their stock in Nationwide Financial for about $2.2 billion cash, or $47.20 per Class A common share.

The price is about 16% higher than the March 4 closing price, Nationwide Mutual says.

Nationwide Mutual and its affiliates now own 66% of the equity and 95% of the voting power of Nationwide Financial, Nationwide Mutual estimates.

The offer “provides the public stockholders of NFS with immediate liquidity and certain value in an uncertain market,” Fred Finney, a Nationwide Mutual board member, writes in a letter filed with the U.S. Securities and Exchange Commission.

Nationwide Mutual and Nationwide Financial should work better together if they are back under common ownership, Finney says.

Nationwide Mutual wants to acquire Nationwide Financial by merging Nationwide Financial into a newly created corporation.

Once the deal was completed, Nationwide Financial common stock would no longer trade on the New York Stock Exchange, Finney writes.

Nationwide Financial has formed a special committee to evaluate the proposal, and Nationwide Mutual says it expected the formation of the committee, Finney writes.

The deal still must be approved by the special committee and the boards of Nationwide Mutual and two Nationwide Mutual affiliates, Nationwide Mutual Fire Insurance Company and Nationwide Corp., Finney writes.

Finney notes that Nationwide Mutual reserves the right to walk away from the deal until the companies approve a definitive merger agreement.

Analysts in the Chicago office of Fitch Ratings say they want to think about the proposal before making any changes to the ratings of Nationwide Mutual and its affiliates.

Fitch has assigned an A rating to Nationwide Mutual’s surplus notes, and an A rating to senior notes issued by Nationwide Financial.

“Fitch’s initial analysis of the proposed transaction’s effect on the capital position of the combined organization indicates that the purchase of the outstanding publicly held shares will significantly reduce the capital of the organization, but capital adequacy is estimated to remain within thresholds commensurate with the current rating level,” Fitch says in a comment on the Nationwide Mutual proposal. “However, Fitch continues to review year-end 2007 capital adequacy under our economic capital model, Prism…. The impact of management’s decision to spend $2.2 billion in capital at this time is still being factored into the ratings.”

Standard & Poor’s Ratings Services, New York, placed S&P ratings on Nationwide Financial on Credit Watch with negative implications. The rating action reflects the lower financial strength rating of the acquirer, as well as uncertainty regarding the potential effect on Nationwide Financial’s capitalization, according to S&P.

S&P rates the core life operating companies of Nationwide Financial AA minus. The core life companies include Nationwide Life Insurance Company, Nationwide Life & Annuity Insurance Company, Nationwide Life Insurance Company of America and Nationwide Life & Annuity Company of America.

S&P has given Nationwide Mutual a rating of A plus.

Following an evaluation, the ratings could be lowered a notch. However, S&P left open the possibility that Nationwide Financial’s ratings could be affirmed if Nationwide Financial and its subsidiaries perform well and show they are independent enough to do well if the parent group exhibits difficulties.

S&P also wants to know more about the possible effects of the deal on business strategy, according to Matt Carroll, S&P associate director.

Nationwide Financial has always had access to Nationwide Mutual’s distribution force, but it’s possible that the proposed deal could strengthen that relationship, says Kevin Ahern, S&P senior director.

Ahern says the Nationwide Financial deal could help Nationwide Mutual reduce vulnerability to catastrophes by making its operations more diversified.

Moody’s Investors Service, New York, has affirmed the Aa3 insurance financial strength rating it has assigned to Nationwide Financial, and it also has affirmed the ratings it has assigned to Nationwide Mutual.

Although the deal would reduce capital levels at Nationwide Life and at Nationwide Mutual, capital would continue to be “superior” in the Aaa range, according to Laura Bazer, a senior credit officer at Moody’s.

Loss of access to the stock market might be offset by freer flow of capital between the life and property-casualty units, Bazer writes.