Bermuda-based Endurance Specialty Holdings Ltd. today offered to buy Aspen Insurance Holdings Limited, also based in Bermuda, for $3.2 billion, or $47.50 per Aspen share, in a hostile takeover.
The combined company would have more than $5 billion of combined annual gross premiums written, diversified across products and geographies.
However, Aspen rejected the offer in no uncertain terms, claiming the “ill-conceived” bid “undervalues the company, represents a strategic mismatch, carries significant execution risk, and would result in substantial dis-synergies.”
John R. Charman, Endurance’s chairman and CEO, said his company has been trying since late January to engage in negotiations with Aspen but that Aspen’s board and management have refused.
“We are fully committed to this transaction and are confident that Aspen’s shareholders will recognize the value of our proposal and actively encourage their Board to begin constructive discussions with Endurance without delay, with the goal of reaching a negotiated transaction,” Charman said in a letter to Aspen’s board of directors this morning.
Charman said the deal would be paid for with a combination of cash and Endurance common shares.
In a statement issued at 10:25 a.m., Aspen spurned Endurance’s overture. Aspen said its board of directors, after careful evaluation with the assistance of its financial and legal advisors, unanimously rejected the unsolicited proposal from Endurance as “not in the best interests of Aspen or its shareholders.”
Glyn Jones, chairman of the board of directors for Aspen, questioned the caliber of Endurance’s performance, management and underwriting in rebuffing the bid.
“Aspen has a proven track record of performance and a clear strategy to increase shareholder value. Endurance has a mixed operating track record, new leadership, an unproven strategy, and no experience with large acquisitions. Moreover, this transaction would be highly disruptive to Aspen’s corporate culture, which has proven to be a significant competitive advantage in the marketplace,” Jones said in the statement.
Aspen said it considered among other things that the combination would “burden” Aspen with Endurance’s “unproven underwriting teams with no clear strategy,” an “unprofitable insurance business” and a “volatile and challenged” crop business.
Aspen also charged that Endurance has “shown a public disdain for Lloyd’s,” which it said “is the growth engine of Aspen’s well-established international insurance business.”
Endurance said its proposal provides Aspen shareholders with a 21 percent premium to Aspen’s closing share price on April 11, 2014 and a 15 percent premium to Aspen’s all-time high share price of $41.43 on December 31, 2013.
“This transaction is, quite simply, a unique opportunity to deliver value to shareholders of both Aspen and Endurance, while creating a new global leader in the industry,” said John R. Charman, Endurance’s chairman and CEO.
Charman said that the specialized businesses of Endurance and Aspen, such as Endurance’s agriculture insurance business and Aspen’s Lloyd’s operations, are “highly complementary.”
In connection with the transaction, Endurance expects the combined company would generate synergies exceeding $100 million annually in cost savings, underwriting improvements, capital efficiencies and enhanced capital management opportunities.
Endurance said the cash offered to Aspen shareholders would be funded from Endurance’s cash resources and $1.05 billion of newly issued common shares to investors led by funds advised by CVC Capital Partners Advisory (U.S.) Inc. and its affiliates, which Charman said have already completed due diligence on Endurance and the merits of the transaction, and have provided an equity commitment letter to Endurance.
Endurance said it would maintain the headquarters of the combined company in Bermuda, with a significant presence in London, New York and other key markets.