Shareholder asks Tower Group to up its offer for CastlePoint

By Lisa Kerner

Charlotte, N.C., Aug. 8 - CastlePoint Holdings, Inc. investor Leon G. Cooperman, managing member of Omega Associates, LLC, said he is opposed to the current terms under which the company agreed to combine with Tower Group, Inc.

Cooperman, a 7.2% shareholder, suggested Tower "sweeten the package with a warrant that adds about $2 in value" to gain more support for the transaction.

A copy of Cooperman's Aug. 7 letter to Tower chairman and chief executive officer Michael Lee was included in a schedule 13D filed with the Securities and Exchange Commission.

Lee is also chairman and CEO of CastlePoint.

According to Cooperman, Tower solicited Omega to participate in the private placement of CastlePoint shares in March 2006, making assurances that CastlePoint investors would be independently represented and treated fairly in any subsequent dealings with Tower Group.

Cooperman, who also has an ownership position in Tower, challenged Lee to prove that the proposed merger is fair to CastlePoint shareholders, the letter noted.

"Since I am positively disposed toward Tower and always expected a transaction to take place, my opposition is only due to the price being offered," Cooperman said.

Cooperman added that he knew of no "non-distressed transaction in the insurance space that took place at the multiple of earnings and book value that Tower is paying for CastlePoint.

It was previously reported that Tower agreed to acquire CastlePoint in a cash and stock deal valued at about $490 million, or $12.68 per share, based on Tower's closing stock price of $23.09 on Aug. 4.

CastlePoint shareholders will receive 0.47 of a share of Tower common stock and cash consideration of $1.83 for each share of CastlePoint common stock.

Tower said the exchange ratio is subject to adjustment based on Tower's volume weighted average price per share during a 15-day trading window prior to closing.

If Tower's average stock price during the period falls below $17.50, the exchange ratio will be fixed at 0.5371, a prior news release said.

CastlePoint will have a limited time right to terminate the agreement, unless Tower elects to add Tower shares or cash to provide CastlePoint shareholders with a value per share of $11.23, including the amount in cash per share.

Both companies' boards of directors have approved the agreement and recommended the transaction to their respective shareholders.

Tower noted it currently owns about 6.7% of the common shares of CastlePoint and intends to vote all of its shares in favor of the merger. Lee agreed to vote all of his shares of Tower and CastlePoint in favor of the transaction.

Tower is a New York property and casualty insurance company.

CastlePoint is a Hamilton, Bermuda-based holding company that provides property and casualty insurance and reinsurance business solutions to small insurance companies.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.