Watford Holdings Ltd.’s board of directors announced they are considering an acquisition offer of $34.50 per share from Enstar Group which could be a “superior proposal” to the recent offer from Arch Capital Ltd. for approximately $622 million, or $31.10 per share.
Here’s a short history of the offers and counter offers for Watford. According to press reports, an initial offer for Watford was made by Arch in September of $26 per share, or $500 million. However, this reported bid by Arch was never offered formally (with filings at the Securities and Exchange Commission) and could have just been based on industry rumor, sources say.
Enstar, which owns 9.1% of Watford, made a formal offer of $31.00 per share in early October, while Arch countered with its own (formal) offer on Oct. 9 to acquire all of Watford’s common shares in an all-cash transaction valued at approximately $622 million, or $31.10 per share.
Watford’s board of directors then announced on Oct. 19 it had received a possible “superior proposal” from Enstar, which it must consider in order to exercise its fiduciary duties. Watford said it has not determined whether Enstar’s proposal in fact constitutes a “superior proposal” under the current provisions of the merger agreement with Arch and has not yet changed its recommendation in support of the merger with Arch.
Watford’s underwriting operations are managed exclusively by subsidiaries of Arch Capital Group Ltd., which owns 12.6% of Watford shares. Further, a significant majority of Watford Re’s investments are managed by HPS Investment Partners.
Sources have explained that the unusual relationship between Watford, HPS and Arch could make it difficult for other buyers to acquire and operate Watford due to the long-term underwriting and investment contracts.
Morgan Stanley is acting as financial adviser to Watford, and Clifford Chance US LLP is serving as Watford’s legal adviser.
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