By Lisa Kerner
Charlotte, N.C., July 9 - The boards of directors of Validus Holdings, Ltd. and IPC Holdings, Ltd. approved a definitive amalgamation agreement to combine to create what they said will be a "leading Bermuda carrier in the short-tail reinsurance and insurance market."
IPC shareholders will receive $7.50 in cash and 0.9727 Validus voting common shares for each IPC common share, a Validus news release said.
The deal is valued at approximately $1.65 billion and is expected to close in the third quarter of 2009, subject to shareholder approval.
According to Validus, the payment gives IPC shareholders a 24.9% premium and is valued at $31.73 per share based on IPC's and Validus' closing stock prices on March 30, the last trading day before the announcement of Validus' initial offer.
Validus previously offered $3.75 in cash and 1.1234 Validus voting common shares for each IPC common share.
"The significantly higher cash component and absence of book value related termination rights, increases the certainty of value and lessens the risk for IPC's shareholders," IPC chairman Kenneth L. Hammond said of the revised offer.
IPC said Validus agreed to pay the $50 million termination fee due under the IPC/Max Capital Group Ltd. transaction that was rejected by a majority of IPC shareholders. The companies had agreed to combine in a stock-for-stock transaction valued at approximately $912 million.
Max Capital acknowledged payment of the termination fee in a form 8-K filed with the Securities and Exchange Commission on Thursday.
Aquiline Capital Partners LLC, Vestar Capital Partners and New Mountain Capital, LLC, collectively owning approximately 38% of Validus' outstanding voting common shares, agreed to vote in favor of the issuance of Validus shares in connection with the transaction.
Once the merger is complete, Validus shareholders will own approximately 62% of the combined company and IPC shareholders will own approximately 38%.
Ed Noonan, chairman and chief executive officer of Validus, will continue to lead Validus.
Validus ends exchange offer
Validus said it is withdrawing and terminating its exchange offer for IPC shares as a result of the agreement. The company is also terminating its solicitation efforts in connection with its other previously announced alternative steps to complete a transaction with IPC, including a scheme of arrangement and calling of a special meeting of IPC shareholders to replace IPC's board.
Flagstone Reinsurance Holdings Ltd. offered to acquire IPC last week for 2.6380 Flagstone shares plus $5.50 in cash for each IPC common share.
"We are surprised and disappointed that the IPC board chose the Validus offer over our proposal, which we felt offered superior economics in the short term, and better prospects in the long term," Flagstone chairman Mark Byrne said in a company news release.
J.P. Morgan Securities Inc. advised IPC. Greenhill & Co., LLC advised Validus.
All four reinsurance companies are based in Bermuda.
| Acquirer: | Validus Holdings, Ltd.
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| Target: | IPC Holdings, Ltd.
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| Announcement date: | July 9
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| Price per share: | $7.50 in cash and 0.9727 Validus shares
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| Expected closing: | Third quarter of 2009
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| Stock price of acquirer: | NYSE: VR: $22.60 on July 8
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| Stock price of target: | Nasdaq: IPCR: $27.61 on July 8
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