By Lisa Kerner
Charlotte, N.C., May 21 - IPC Holdings, Ltd.'s board of directors unanimously reaffirmed its recommendation of IPC's proposed amalgamation with Max Capital Group Ltd. and said that Validus Holdings, Ltd.'s May 18 offer does not constitute a superior proposal.
As a result, IPC shareholders are urged to reject the Validus exchange offer and not tender their shares, an IPC news release said.
Validus chairman and chief executive officer Ed Noonan said he was disappointed but not surprised by IPC board's decision.
"Our offer - which provides a significant premium to IPC's share price and a $3.00 cash component per IPC share - is clearly a better deal than the proposed Max amalgamation, which provides no consideration to IPC's shareholders and inferior growth prospects," Noonan said in a statement released late Thursday.
The exchange offer for IPC's shares ends at 5 p.m. ET on June 26.
Validus announced on Monday that it increased its offer for IPC to include $3.00 per share in cash plus 1.1234 shares of Validus voting common shares for each IPC common share held.
The new offer is valued at $30.14 per IPC share based on Validus' closing price on May 15.
Validus said it initially offered to acquire IPC for 1.2037 shares of Validus voting common shares, with no cash consideration.
Chairman of IPC's board Kenneth L. Hammond called Validus' proposal highly conditional and questioned whether the transaction could be completed. In addition, the $3.00 cash portion of the offer, which is only approximately 10% of the total consideration, is taxable to some IPC shareholders.
"Timing of any combination with Validus is uncertain and remote, extending well beyond the inception of hurricane season in June thereby substantially increasing the risk inherent in any Validus transaction," Hammond said in the release.
Validus said it has provided IPC shareholders with a clear path to timely completion through the exchange offer, which could close as early as June 26, and the scheme of arrangement, which could close as early as mid-July.
IPC, in a Thursday letter to Validus, highlighted the obstacles Validus faces in its attempt to complete the exchange offer and transfer shares.
According to IPC, its bylaws prevent Validus from obtaining registration as legal owner of 10% or more of IPC's common shares under the exchange offer and prohibit Validus from exercising voting control over IPC.
In addition, IPC does not accept that under Bermuda law Validus would be entitled to compulsorily acquire the shares of the remaining minority shareholders who do not tender their shares by using Section 102 of the Bermuda Companies Act 1981, even if Validus were to acquire 90% beneficial ownership of IPC through Cede & Co.
In a May 12 news release, Validus said it will acquire beneficial ownership of the exchanged IPC shares, but Cede, which is the registered owner of more than 90% of the outstanding IPC shares, will continue to be the registered owner, and no registration of transfer for those shares will be needed.
IPC also asked its shareholders to vote for the proposals related to the amalgamation with Max at the annual general meeting of shareholders on June 12.
Max and IPC agreed to combine in a stock-for-stock transaction valued at approximately $912 million. Max shareholders will receive 0.6429 IPC shares for each Max share.
The companies said they have received all of the regulatory conditions required to complete their amalgamation agreement, including approvals from the insurance commissioners of the states of Indiana and Delaware and early termination of the Hart-Scott-Rodino waiting period granted by the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice.
Validus' bid for IPC
Validus has filed an application with the Supreme Court of Bermuda to convene a meeting of IPC shareholders in connection with its proposed scheme of arrangement.
The Supreme Court of Bermuda Commercial Court decided not to grant Validus' application for an expedited trial on its litigation against IPC and Max. Validus said its lawsuit challenges the $50 million termination fee and "no-talk" provision in the IPC/Max agreement.
Validus previously announced a three-part plan to acquire IPC that includes soliciting IPC shareholders to vote against the proposed Max amalgamation, holding an exchange offer for all IPC common shares and pursuing a scheme of arrangement under Bermuda law.
Based in Hamilton, Bermuda, Validus provides insurance coverage and reinsurance coverage in the property, marine and specialty lines markets.
IPC, located in Pembroke, Bermuda, provides property catastrophe reinsurance as well as aviation, property-per-risk excess and other short-tail reinsurance.
Specialty insurance and reinsurance provider Max is based in Hamilton, Bermuda.
Mentioned in this article
| IPC Holdings, Ltd.: | Nasdaq: IPCR
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| Max Capital Group Ltd.: | Nasdaq: MXGL
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| Validus Holdings, Ltd.: | NYSE: VR
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