Lloyd’s Insurer Omega Backs Haverford Offer

By | October 20, 2011

Insurance entrepreneur Mark Byrne pulled ahead in the race to buy Lloyd’s of London insurer Omega after Omega and its top shareholder backed his offer, prompting his main rival to withdraw.

Omega, at the centre of a three-way takeover battle since mid-June, will pursue the offer from Byrne’s Haverford investment vehicle as the support of 29 percent shareholder Invesco makes it the only one that can be completed, the insurer said on Thursday.

“You don’t want to do your chicken dance until you get over the tryline, but it does seem that my deal is now favoured,” Byrne told Reuters in a telephone interview.

Byrne, co-founder of reinsurer Flagstone Re and son of U.S. insurance magnate Jack Byrne, wants to buy 25 percent of Omega for a maximum of 83 pence per share, and take over as the company’s executive chairman.

Lloyd’s of London rival Canopius, which had offered to buy Omega outright for more than 83 pence per share in cash while offering Invesco the opportunity to reinvest in the enlarged, privately-held group, withdrew its approach.

“We are disappointed not to be able to proceed with our offer and wish Omega and its shareholders all good fortune,” Canopius chairman Michael Watson said in a statement.

Under the Haverford offer, the final price would be that required to achieve a 25 percent sale after each shareholder submits the minimum they can accept in a so-called Dutch auction.

PRICE FLOOR

Haverford has set a maximum price of 83 pence, and a source familiar with the situation said it planned to raise the minimum price to 73 pence from 70 pence.

Haverford and Byrne declined to comment.

Omega shares were down 5.3 percent at 66.6 pence by 1310 GMT, valuing the company at about 161 million pounds.

“The outlook for Omega as a business is quite tough over the next couple of years, and fair value is probably below this,” said Peel Hunt analyst Sarah Lewandowski.

“It might seem strange to sell at less than 70 pence, but 75 percent of your shares could be exposed to a price much below this.”

A third offer from Barbican Insurance involving an all-share merger followed by an option for Omega investors to exit at 84 pence per share in cash “is not in shareholders’ interests,” Omega said.

Publicly-quoted Lloyd’s of London insurers are seen as ripe for consolidation as persistently low insurance prices have weighed on their shares, while stricter capital requirements are putting added pressure on smaller players to merge.

Chaucer accepted a 292 million pound ($462 million) offer from U.S. rival Hanover Insurance in April, while Brit Insurance, sponsor of the England cricket team, succumbed last year to a bid from buyout firms Apollo and CVC.

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