Updated from 11:17 a.m. EDT

Privately-held insurance giant Liberty Mutual Group said Wednesday it has agreed to buy

Safeco

(SAF) - Get Report

and take it private for $6.5 billion in cash.

The deal, approved by boards of directors at both companies, would make Safeco part of Liberty Mutual's Agency Markets business unit, which posted $5.6 billion in revenue last year. It would create the fifth-largest property and casualty insurer in the U.S.

Owned by its policyholders, Liberty Mutual offered $68.25 a share for Safeco, a 51% premium to the company's closing price on Tuesday.

Shares of Safeco were recently soaring $20.78, or 46%, to $66.01.

Liberty Mutual said its offer is subject to no financing conditions, and the deal is expected to close by the end of the third quarter.

Safeco said it would postpone its previously scheduled May 7 annual shareholders meeting because of the transaction.

Liberty Mutual posted a profit of $1.5 billion last year on $25.9 billion in revenue. Safeco's profit last year was $707.8 million, on revenue of $6.2 billion.

"The addition of Safeco significantly expands and strengthens the Liberty Mutual Group," said Edmund Kelly, Liberty Mutual's chairman, president and CEO.

Allstate

(ALL) - Get Report

,

Chubb

(CB) - Get Report

,

Allianz

( AZ),

Travelers

(TRV) - Get Report

,

Hartford

(HIG) - Get Report

and

Progressive

(PGR) - Get Report

were mostly trading lower.