Validus to Buy Flagstone Re for $600 Million in Cash and Stock

August 30, 2012

Reinsurer Validus Holdings Ltd said it will buy Flagstone Reinsurance Holdings for about $600 million in cash and stock to boost its property reinsurance business.

The deal comes after Validus unsuccessfully tried to buy another reinsurer, Transatlantic Holdings Inc, last year. Transatlantic’s board, which repeatedly rebuffed Validus, accepted a $3.4 billion stock-and-cash deal from property and casualty insurer Alleghany Corp.

Validus will pay $8.43 per Flagstone share, a 19 percent premium to the stock’s Wednesday close. Flagstone shareholders will receive $2 in cash and 0.1935 Validus shares for each share they tender in the offering.

Flagstone shares were set to open up nearly 18 percent on Thursday.

Bermuda-based Validus said Lightyear Capital and Trilantic Capital Partners, which together own more than a fifth of Flagstone, have agreed to the deal.

“The transaction… concludes a lengthy and extensive process in which the Board carefully considered a broad range of strategic alternatives,” Flagstone Chief Executive David Brown said in a statement.

Flagstone has been selling non-core businesses to focus on property and casualty reinsurance. The reinsurer sold its Lloyd’s operations and Island Heritage unit in April.

Shares of Flagstone were up at $8.35 in premarket trading. They closed at $7.06 on the New York Stock Exchange on Wednesday. Validus shares closed at $33.24.

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