The latest round in the battle over competing offers from Max Capital and Validus Holdings to take over Bermuda-based IPC Holdings, Ltd. opened with Validus releasing the full text of a letter it sent to IPC’s Board of Directors on June 6 (See IJ web site – https://www.insurancejournal.com/news/international/2009/04/06/99353.htm].
The letter reads as follows:
Dear Members of the Board:
The difficulty of being unable to speak directly has lead to an exchange of press releases, which is unfortunate. In this context, we would like to respond to the Max statement issued this morning by describing the analytical framework we believe is appropriate.
In today’s press release, Max modified its description of its calculation of pro forma book value per share. In essence, the Max calculation now describes what an IPC shareholder would receive on a standalone basis from either Validus or Max. We disagree with this basis for valuation. Our approach is focused on a comparison of what an IPC shareholder would own as a result of either transaction.
However, if we were to follow the Max approach, we would note that there are a number of adjustments contemplated in the proposed Max/IPC Amalgamation Agreement, which would reduce the standalone value that Max delivers by $117.4 million. The joint proxy statement/prospectus filed by IPC and Max references, among other adjustments, the need to increase Max’s loss reserves for annuity claims as well as property and casualty claims by $130.0 million. As a result, the Max book value delivered would be reduced by $2.06 per Max share, resulting in a book value delivered of $20.40 per share, on the basis of Max’s calculation of diluted book value.
I would also note that Validus and Max use differing accounting conventions for calculating diluted book value per share. While each is valid, on the basis upon which Validus calculates diluted book value per share, the Max value delivered would be $19.68 after a $1.81 per share reduction in book value.
We have provided the attached schedule of our calculations in an effort to be as transparent as possible in our communication with you.
The letter was signed by Validus Chairman and CEO Edward J. Noonan.
Source: Validus Holdings – www.validusre.bm
(Ed. note: The schedule is available on the Validus web site)
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