From Bernews

The mergers in Bermuda’s re/insurance industry continue, with Endurance Specialty Holdings Ltd and Montpelier Re Holdings Ltd today [Mar 31] announcing that they have entered into a definitive merger agreement in which Endurance will acquire Montpelier.

Endurance will acquire Montpelier for consideration of 0.472 shares of Endurance and $9.89 in cash for each Montpelier common share, which represents $40.24 per Montpelier common share, or $1.83 billion in aggregate, based on Endurance’s closing price on March 30, 2015.

John R. Charman, Endurance’s Chairman and Chief Executive Officer, said, “Endurance’s strategic acquisition of Montpelier represents a compelling value creation opportunity for Endurance’s shareholders, with accretion to earnings per share and return on equity.

“As a result of the transaction, we expect to achieve meaningful transaction synergies through cost savings and greater capital efficiencies. Importantly, the acquisition materially increases our breadth of distribution with the addition of a good-sized and scalable Lloyd’s platform and an attractive property catastrophe business that complements our existing reinsurance portfolio.

“The acquisition also provides Endurance with a natural introduction to the business of managing insurance and reinsurance investment products for third-party capital investors. Montpelier’s historic high quality portfolio reflects a disciplined approach to underwriting that is consistent with Endurance’s strong risk management and underwriting culture.”

Under the terms of the agreement, the aggregate consideration for the transaction will consist of $450 million in cash and approximately 21.5 million Endurance ordinary shares, which are valued at approximately $1.4 billion based on Endurance’s closing price on March 30, 2015.

The cash portion of the consideration will be funded through a pre-closing dividend paid by Montpelier to its common shareholders. Following completion of the transaction, Montpelier’s existing shareholders will own approximately 32% of Endurance’s outstanding ordinary shares.

The acquisition price of $40.24 per Montpelier common share, based on Endurance’s closing price on March 30, 2015, represents a 19% premium to Montpelier’s unaffected closing price per common share as of the close of business on December 10, 2014. The acquisition price also represents a multiple of 1.21x Montpelier’s fully converted book value per common share as of December 31, 2014.

Christopher Harris, Montpelier’s President and Chief Executive Officer, said, “This transaction with Endurance provides significant value for Montpelier shareholders through up-front cash and an equity interest in a combined Endurance with enhanced scale, greater market presence and substantial product and geographic diversity.

“The combination of our balance sheets, our diverse underwriting platforms and high-quality books of business is a compelling opportunity for our shareholders, customers and distribution partners.”

For the 12 months ended December 31, 2014, the two companies had pro forma gross premiums written of $3.6 billion. Endurance common shareholders’ equity will increase from $2.8 billion to $4.1 billion, total capital will increase from $3.7 billion to $5.5 billion, and total cash and invested assets will increase from $6.7 billion to $9.3 billion on a pro-forma basis.

Endurance expects to achieve more than $60 million of annual run-rate cost savings and to realize meaningful capital efficiencies from the acquisition. The transaction is expected to be immediately accretive to earnings per share and return on equity, excluding non-recurring integration and transaction costs.

Endurance’s Board of Directors will be expanded at closing to include three of Montpelier’s current directors. Endurance’s senior management team will lead the combined company from its Bermuda headquarters.

The agreement has been unanimously approved by both companies’ Boards of Directors. The transaction is expected to be completed in the third quarter of 2015 and is subject to the approval of both companies’ shareholders, regulatory approvals and the satisfaction of customary closing conditions.

Funds affiliated with Charlesbank Capital Partners have agreed to vote their Montpelier common share stake in favor of the proposed transaction.

Endurance’s financial advisors in connection with the transaction are Morgan Stanley & Co. LLC and Jefferies LLC, and its legal counsel is Skadden, Arps, Slate, Meagher & Flom LLP. Montpelier’s financial advisor in connection with the transaction is Credit Suisse Securities (USA) LLC, and its legal counsel is Cravath, Swaine & Moore LLP.

This continues the ‘merger mania’ with Bermuda re/insurers, following after the deals between XL and Catlin [link], RenaissanceRe and Platinum Re [link] and Axis and PartnerRe [link].

For more on this story go to: http://bernews.com/2015/03/endurance-acquire-montpelier-re-holdings/

Related story:

Appleby advised Montpelier for acquisition
Appleby acted as counsel to Montpelier Re Holdings Ltd. in relation to its sale to the Endurance Speciality group for a purchase price to be satisfied by a mixture of shares and cash which values Montpelier at c.USD1.83bn and structured by way of merger with an Endurance subsidiary.

Under the terms of the agreement, Montpelier shareholders will receive 0.472 shares of the parent of the combined company for each share of Montpelier common shares they own and a cash payment of $9.89 to be funded by way of a pre-closing dividend to be paid by Montpelier to its common shareholders.

The Appleby team was led by Partner Brad Adderley [pictured], with Associates Matthew Ebbs-Brewer, Kendall Evans and Gary Harris serving as primary team members.

Brad Adderley commented: “It was a pleasure working with Montpelier, a valued and long standing client on this transaction which will create a strong platform for the combined group enterprises and occupy a strong position in the market.

“Appleby’s deep understanding of the global insurance industry and leading market position allowed us to be an important partner to Montpelier throughout this process. It also caps off a stellar year for the Bermuda insurance team which has advised on many of the recent re/insurance mergers and acquisitions.”

The combined group headquarters will continue to be located in Bermuda, and the transaction will allow Endurance to benefit from Montpelier’s ability to offer reinsurance services globally through subsidiaries in the U.S. and U.K., together with assisting Endurance to enter into managing insurance and reinsurance investment products for third parties. The merger has been unanimously approved by both boards and is expected to close in the third quarter of 2015.
IMAGE: Brad Adderley