Mitsui Sumitomo has agreed a merger to acquire Amlin in a £3.47bn ($5.33bn) cash deal.
The agreement works out at 2.4x Amlin’s net tangible book value per share.
Amlin shareholders will receive 670p per share in cash under the deal, which the London market re/insurer’s chief executive, Charles Philipps, described as a “compelling” combination.
“It delivers excellent value for shareholders, improved career prospects for our employees, and enhanced continuity and security for our clients,” said Philipps.
The firm's shareholders at September 4 will be entitled to the interim dividend of 8.4p per Amlin share for the first half of 2015, payable on October 1.
“We are delighted to be announcing the combination of Mitsui Sumitomo and Amlin to create a world-leading insurance company, with an international business anchored in the Lloyd’s market,” said Yasuyoshi Karasawa, Mitsui Sumitomo president and CEO.
This latest deal in the spate of 2015 mergers and acquisitions leaves only four remaining independent London market reinsurers: Novae, Lancashire, Hiscox and Beazley (see below chart).
“We believe that our respective Lloyd’s, Bermudian and European businesses fit well together and will allow increased development opportunities," said Philipps.
Karasawa added: “The combination will accelerate Mitsui Sumitomo’s strategy of growing its international business, and drive a number of benefits across Amlin’s business as a result of it being part of a substantially larger group."
The price represents a 36% leap over Amlin’s closing price of 492.5p per share on September 7.
It also represents a 32% premium on the volume weighted average closing price per Amlin share for the month up to September 7.
The deal also represents 2.4x Amlin’s net tangible book value per share, on a fully diluted basis, as at June 30 of 275.2p.
“We believe this combination will create significant value for Mitsui Sumitomo and Amlin’s shareholders, and will also position the group to drive sustainable long term growth given the enhanced platform that the combined group will enjoy,” said Karasawa.
“We are excited about the opportunity to benefit from the strategic insight that Charles Philipps and his colleagues will be able to provide in our international business following completion of the proposed transaction,” said Karasawa.
The transaction is planned to complete by a court-sanctioned scheme of arrangement under the UK's Companies Act.
First it must gain approval of Amlin shareholders at the court meeting, passing necessary resolutions by Amlin shareholders at the firm's general meeting, plus the sanction of the scheme by the court.
A statement on behalf of Amlin's management directors, advised by Evercore and Rothschild, said the terms of the acquisition were "fair and reasonable" and they "recommend unanimously" that the deal proceed.
Amlin directors who hold the re/insurer's shares have committed their holdings to the deal, totalling almost 4m Amlin shares, representing 0.8% of the Amlin issued share capital.
Mitsui Sumitomo has committed votes in favour of the scheme from two major Amlin institutional shareholders Invesco Asset Management and Majedie Asset Management, representing 76.7m Amlin Shares, or 15.2% of Amlin’s issued share capital.
Taken together with Amlin's management's holdings, that means the holders of 80.7m Amlin shares are already behind the deal, representing 16% of Amlin’s issued share capital.
Charles Philipps, Amlin chief executive, said: “We have always had a very high regard for Mitsui Sumitomo, our strategies and corporate values are closely aligned, and this transaction will now provide Amlin with the increased scale and financial muscle that will be required for long term success in our industry.
“Mitsui Sumitomo’s presence in the Association of Southeast Asian Nations (ASEAN) region and its ambitions in the US clearly offer very exciting prospects for Amlin,” said Philipps.