The board of Bermudian property-catastrophe reinsurer IPC Holdings has unanimously reaffirmed its recommendation that IPC shareholders vote to approve a merger with fellow Bermudian Max Capital. Class of 2005 Bermuda reinsurer Validus last week launched a counter bid for Max Capital.
On March 2, IPC and Max Capital announced that they would combine operations in a stock deal valued at around $912m, in which Max Capital shareholders would receive 0.6429 IPC shares for each Max Capital share and IPC shareholders would own approximately 58% of the combined entity. Validus offered a stock-for-stock deal, in which each IPC common share will be exchanged for 1.2037 Validus common shares, and said the offer values IPC's common equity at $1.68bn.
The IPC board has today written a letter to Validus, informing it of its decision to recommend staying with the Max Capital agreement. The board determined that the offer did not constitute a superior proposal as defined in its merger agreement with Max Capital.
The IPC board noted that the Max Capital combination "provides clear strategic and financial benefits to all IPC shareholders". It said the Validus offer did not meet its diversification goals, its amalgamation proposal is less certain, would take longer to close and is riskier for IPC shareholders, and that the Max Capital deal has more value creation potential.
Kenneth Hammond, chairman of IPC's board of directors, said in a statement: "The IPC board continues to believe that the combination with Max will create a stronger and more diversified underwriting franchise with less correlated risk. Our newly-combined entity will have the scale and flexibility to better manage capital and take advantage of attractive opportunities in the property-casualty marketplace, as and when they arise.
"In addition, our transaction with Max has more certainty and a clearer path to close, and we expect it to close more quickly than any Validus transaction. We are confident this combination is in the best interests of IPC, and we recommend shareholders vote in favor of this transaction at the upcoming shareholder meeting."