Endurance Specialty Holdings Ltd. (ENH:US), the Bermuda-based provider of property and casualty insurance, announced a $3.2 billion offer to buy Aspen Insurance Holdings Ltd. (AHL:US) after the target company turned down its proposal.
Endurance offered to pay $47.50 per share, 21 percent more than the April 11 closing price of $39.37, the company said today in a statement.
“Despite our repeated attempts since late January to engage in confidential and friendly discussions, Aspen’s board and management have rebuffed our proposal,” Endurance said. The refusal to hold discussions denies Aspen’s shareholders “the ability to understand and attain the clear financial, operational and strategic benefits of this transaction,” Endurance said.
Mid-sized insurers and reinsurers have been combining or joining with larger companies to diversify risk and gain scale to take on bigger accounts from primary carriers. Endurance said its offerings in crop insurance would complement Bermuda-based Aspen’s products, including its operations in the Lloyd’s of London market.
Endurance said its return on equity (ENH:US) and earnings per share would gain in 2015 under a takeover through more than $100 million in annual “synergies,” including cost cuts, underwriting improvements and better chances for capital management.
Aspen said its board of directors unanimously rejected the offer after consulting with advisers including Goldman Sachs Group Inc.; Wachtell, Lipton, Rosen & Katz; and Willkie Farr & Gallagher LLP.
“Endurance’s ill-conceived proposal undervalues our company, represents a strategic mismatch, carries significant execution risk, and would result in substantial dis-synergies,” Aspen Chairman Glyn Jones said in a separate statement.
Aspen jumped 11 percent to $43.77 at 4:15 p.m. in New York after trading as high as $46.86. The company had advanced about 1.8 percent in the 12 months through April 11. Endurance dropped 2.8 percent to $52.32, and is up about 8 percent over the past year.
Aspen investors (AHL:US) will have the option to receive cash, Endurance shares or a combination, according to the statement. Endurance said it plans to pay 60 percent with its shares, and that investors led by CVC Capital Partners Ltd.-advised funds are prepared to buy $1.05 billion of newly issued common shares to help fund the cash portion of the deal. CVC has provided an equity commitment letter, Endurance said.
“The proposal involves a number of substantial execution risks, including financing uncertainty,” Aspen said.
Endurance had an initial public offering in 2003 and counted hedge-fund manager Richard Perry among founding investors. Fidelity Investments, David Booth’s Dimensional Fund Advisors and Vanguard Group Inc. were among Endurance’s top holders as of Dec. 31, according to data compiled by Bloomberg.
Aspen counts BlackRock Inc., Fidelity, Vanguard and Dimensional among top shareholders.
Endurance Chief Executive Officer John Charman is seeking to expand the business after joining last year. Charman is the former CEO of Axis Capital Holdings Ltd. and was ousted as chairman of the company in 2012 following a dispute over his role. He said he plans to buy $25 million of Endurance shares in connection with a takeover.
“The combined company will have a strong balance sheet and capital position, with an enhanced ability to pursue growth opportunities and to withstand volatility,” he said in today’s statement.
Endurance’s bankers on the offer are Morgan Stanley and Jefferies Group LLC. Skadden, Arps, Slate, Meagher & Flom LLP and ASW Law Ltd. are providing legal advice.
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