Aspen Insurance Holdings Ltd. has rejected a $3.2 billion cash-and-stock hostile offer by Endurance Specialty Holdings Ltd., Hamilton, Bermuda-based Aspen said in a statement Monday.
“After careful review and deliberation, the board of directors unanimously determined that Endurance's proposal is not in the best interests of Aspen or its shareholders,” said Aspen Chairman Glyn Jones in a statement. “Endurance's ill-conceived proposal undervalues our company, represents a strategic mismatch, carries significant execution risk, and would result in substantial dis-synergies. Furthermore, most of the consideration to Aspen shareholders would be in a stock that would reflect these problems.”
Mr. Jones added that the most recent Endurance offer “… does not add to the information the Aspen Board had when we thoroughly considered your 18 February 2014 letter and unanimously concluded that the possible acquisition of Aspen by Endurance was not in the best interests of Aspen or its stockholders and that we did not wish to pursue the matter further.”
Pembroke, Bermuda-based Endurance is offering $47.50 per Aspen share, based on 66.7 million fully diluted Aspen common shares as of Feb. 24, 2014, a 21% premium to Aspen's closing share price on April 11, 2014, and a 15% premium to Aspen's all-time high share price of $41.43 on Dec. 31, 2013, Endurance said in a statement Monday.
Endurance plans to fund the takeover with cash on hand and $1.05 billion of newly issued common shares, the company said in the statement.
The combination would create “a global leader in specialty insurance and reinsurance,” Endurance said.
Aspen shareholders would elect whether to receive all cash, all stock, or a combination thereof, “subject to a customary proration mechanism to achieve an aggregate consideration mix of 40% cash and 60% Endurance common shares,” said the Endurance statement.
Friendly overtures ignored
Endurance had launched its offer for Aspen after friendly overtures were ignored, Endurance said in its statement.
In an April 14 letter to the Aspen board, Endurance Chairman and CEO John R. Charman said his company had “been trying since late January to engage with Aspen in a confidential and friendly dialogue regarding a combination of our two companies, and have previously made a specific written proposal that offers your shareholders a substantial premium valuation.”
Mr. Charman said the takeover bid was in response to Aspen's refusal to respond to “repeated attempts” to engage or present the Endurance offer to shareholders.
“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,” Mr. Charman said in his letter to the Endurance board, and pledged his support for the deal.
Analysts were not surprised by the move.
“Endurance has been pretty up front about the fact that they want to get much bigger quickly,” said Meyer Shields, a Baltimore-based analyst with Keefe, Bruyette & Woods Inc.
“Becoming bigger is an important response because we're seeing brokers and reinsurance buyers in particular look at a smaller number of bigger companies,” said Mr. Shields
“I think we've stated previously that there could be some push for consolidation in the Bermuda market,” said Brian Schneider, Chicago-based senior director for insurance with Fitch Ratings Inc. He said that he believed that Endurance had offered a fair price for Aspen.
“It seems like a reasonable premium to the market value,” said Mr. Schneider.