Endurance Specialty hits roadblock in effort to acquire Aspen Insurance

Aspen Insurance Holdings Ltd., which owns a subsidiary that writes insurance in Canada, announced Friday that “preliminary results” indicate most of its shareholders “did not support” a proposal by Endurance Specialty Holdings Ltd. to hold a court-ordered meeting in which Aspen shareholders would vote on Endurance’s US$3.2-billion takeover offer.

Hamilton, Bermuda-based Aspen, whose direct written premiums in Canada were about $12 million in 2013, previously said its board of directors “unanimously agreed to reject” Endurance Specialty’s takeover offer.

Endurance submitted June 9 an “exchange offer” to the United States Securities and Exchange Commission, which expires Aug. 29.

Aspen’s shareholders have not voted on Endurance’s offer.

An Aspen spokesperson told Canadian Underwriter in June that its coverage in Canada is written by Aspen Insurance UK Ltd., “with an outside attorney in Toronto acting as Aspen’s agent in Canada.” Aspen does not have a physical presence in Canada.

Aspen’s primary insurance includes property, casualty, marine, aviation, energy, construction, financial and professional lines. It also provides reinsurance.

A spokesperson for Pembroke, Bermuda-based Endurance told Canadian Underwriter in June that Endurance no longer has an office in Canada but “will insure risks in Canada when permissible pursuant to both federal and provincial law.”

Worldwide, Endurance’s primary insurance lines include professional lines, property, agriculture, casualty, inland and ocean marine, healthcare, global weather, surety bond and contract binding operations. Endurance’s reinsurance coverage includes catastrophe, property, casualty, professional lines and other specialty lines.

Endurance announced April 14 a proposal to acquire all of Aspen’s common shares of Aspen for US$47.50 each. It later increased its offer to US$49.50 per share.

“Under the terms of the Exchange Offer, each holder of Aspen common shares will have the right to receive for their Aspen common shares, at their election: all cash ($49.50 for each Aspen common share); all Endurance common shares (0.9197 Endurance common shares for each Aspen common share); or a combination of cash and Endurance common shares (0.5518 Endurance common shares and $19.80 in cash for each Aspen common share),” Endurance said in a July 1 release.

In rejecting Endurance’s proposal, Aspen’s board of directors has contended, among other things, that Endurance’s proposal “undervalues” Aspen and  “represents a strategic mismatch.”

On July 10, Endurance announced it was sending a letter to Aspen shareholders asking them to vote to support “a court-ordered meeting of Aspen shareholders to consider and vote on a Scheme of Arrangement.”

Endurance had stated in June that if Aspen shareholders were to vote in favour of such a meeting, that “does not require” them to vote in favour of Endurance’s takeover offer if the meeting is held. Instead, Endurance said, it “expresses” their support “for such a meeting.”

Endurance also asked Aspen shareholders to vote to “authorize the requisitioning of a special general meeting of Aspen shareholders to increase the size of Aspen’s board from 12 to 19 directors.” This would mean, Endurance said at the time, that a majority of Aspen directors would then stand for re-election at Aspen’s 2015 annual general meeting. The “target date” for the vote was July 25. For its part, Aspen said it was sending shareholders a “blue card” asking shareholders to reject Endurance’s proposals.

Aspen said July 25, based on “preliminary results,” that it “believes that shareholders owning at least 76% of Aspen’s outstanding shares did not support Endurance’s proposal to call a special meeting at which shareholders would vote on a proposal to increase the size of Aspen’s Board to 19 directors, and shareholders holding at least 81% of Aspen’s outstanding shares did not support Endurance petitioning the Supreme Court of Bermuda as part of a legal maneuver called an involuntary scheme of arrangement.”

In a June 27 release, Aspen suggested that if Endurance were to succeed in obtaining a court-ordered meeting, Endurance “would be able to circumvent the Aspen Board as negotiator” and submit its takeover offer directly to Aspen shareholders “for a ‘take it or leave it’ vote.”