Validus given slim chance for IPC buy; Eyes on Accel-KKR potential to raise SumTotal bid

By Cristal Cody

Tupelo, Miss., May 14 - Validus Holdings, Ltd.'s $1.68 billion hostile takeover attempt of IPC Holdings, Ltd. remains the underdog, as IPC's merger with Max Capital Group Ltd. is ultimately expected to prevail, an analyst told Prospect News on Thursday.

In other situations on Thursday, SumTotal Systems, Inc. must continue buyout negotiations with Accel-KKR LLC through Monday after the company received a superior offer of $4.75 a share from Vista Equity Partners Fund III, LP.

Meanwhile, stocks pushed up Thursday with the broader indexes ahead by the end of the day.

The Standard & Poor's 500 index added 9.15 points, or 1.04%, to close at 893.07, and the Nasdaq Composite index gained 25.02 points, or 1.50%, to finish at 1,689.21.

The Dow Jones Industrial Average rose 46.43 points, or 0.56%, to 8,331.32.

Validus pushes on

The Supreme Court of Bermuda on Wednesday refused to expedite Validus' lawsuit against IPC and Max Capital.

Validus said Thursday in a statement that the lawsuit challenged the $50 million termination fee and "no-talk" provision contained in the merger agreement between IPC and Max Capital.

"The court's ruling has no effect on Validus' resolve to complete its acquisition of IPC, including the exchange offer we announced on May 12, 2009 and the scheme of arrangement, neither of which is conditioned on the elimination of the possible termination fee to Max," Validus said.

Hamilton, Bermuda-based Validus launched an exchange offer to buy out specialty insurer IPC for 1.2037 Validus shares for each IPC share. The offer expires on June 26.

IPC recommends investors reject Validus' offer and vote for its planned $912 million stock acquisition of Max Capital at the annual stockholders meeting on June 12.

An analyst told Prospect News on Thursday that the Bermuda court's ruling did not change much.

"All it kind of ruled out was being able to get rid of the $50 million termination fee. They are still going ahead with their exchange offer," the analyst said of Validus. "Our opinion is unchanged. We continue to think that Max is going to win in the long run."

IPC and Max Capital said Thursday the companies have received all necessary regulatory approvals to complete the amalgamation agreement.

The Bermuda-based companies have received clearance from the insurance commissioners of Indiana and Delaware; the Irish Competition Authority; and early termination of the Hart-Scott-Rodino waiting period from the Federal Trade Commission and the antitrust division of the U.S. Department of Justice.

IPC shares gained $1.04, or 3.98%, to close Thursday at $27.18.

Max Capital's stock added 31 cents, or 1.89%, to $16.72.

Validus shares closed up 92 cents, or 3.90%, at $24.52.

SumTotal continues talks

Vista Equity Partners raised its bid to $155 million, or $4.75 a share, in cash for SumTotal on the eve of the last day of negotiations between SumTotal and buyout firm Accel-KKR.

SumTotal said Thursday that Vista's third revised bid is a superior offer to the $3.80-a-share agreement it had struck with Accel-KKR on April 24.

Vista had offered a second revised bid of $4.50 a share on Sunday. The firm, SumTotal's largest shareholder with about 13% of outstanding shares, first offered to acquire SumTotal for $3.25 a share on April 6.

The new offer extends the negotiation period with Accel-KKR through Monday, SumTotal said in a statement.

Under the merger agreement with Accel-KKR, SumTotal was given until May 23 to consider alternative proposals.

A market source told Prospect News that Vista's second offer of $4.50 a share was fair.

"Overvaluing is in the eye of the beholder. You could argue anything over $2.00, where the stock closed on April 3, is overvaluing it," the source said.

SumTotal's board said it is not withdrawing or amending its recommendation on the Accel-KKR agreement or making a recommendation at this time on the Vista proposal.

If SumTotal accepts Vista's offer, the Mountain View, Calif.-based software solutions company must pay Accel-KKR a $3.1 million breakup fee.

Accel-KKR had no immediate comment.

SumTotal shares closed up 23 cents, or 5.10%, at $4.74 on Thursday.

Mentioned in this article:

IPC Holdings, Ltd. Nasdaq: IPCR

Max Capital Group Ltd. Nasdaq: MXGL

SumTotal Systems, Inc. Nasdaq: SUMT

Validus Holdings, Ltd. NYSE: VR

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