Canadian Underwriter

Aspen Insurance to ‘carefully review’ takeover offer by Endurance

June 9, 2014   by Canadian Underwriter

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Aspen Insurance Holdings Ltd., whose British subsidiary writes insurance in Canada, announced Monday it is advising its shareholders to “take no action at this time” on a US$3.2-billion takeover offer by Endurance Specialty Holdings Ltd.

Hamilton, Bermuda-based Aspen provides primary insurance and reinsurance worldwide. Aspen Insurance UK Ltd.’s net written premiums in Canada were about $12 million in 2013, according to a filing with Canada’s Office of the Superintendent of Financial Institutions. Aspen reported total gross written premiums of US$2.65 billion in 2013.

“Aspen does not have a physical presence in Canada,” a spokesperson wrote in an e-mail to Canadian Underwriter, adding that coverage in Canada is written by subsidiary Aspen Insurance UK, “with an outside attorney in Toronto acting as Aspen’s agent in Canada.”

Worldwide, Aspen’s primary insurance products include property, casualty, marine, aviation, energy, construction, financial and professional lines. Its reinsurance lines include property (catastrophe and other), casualty and specialty. It has offices in Bermuda, the United States, Britain, France Germany, Ireland, Singapore and Switzerland.

For its part, Pembroke, Bermuda-based Endurance also provides primary and reinsurance worldwide, though it does not currently insure any risks in Canada. In 2013 it reported US$2.67 billion in gross written premiums, of which US$1.475 billion was primary insurance. Its primary insurance lines include agriculture, excess hospital medical professional liability, inland marine, ocean marine, surety, directors’ and officers’ liability, errors and omissions, employment practices liability, environmental liability and pension trust liability. Endurance’s provides reinsurance for catastrophe, property, casualty, professional lines, and other specialty lines.

Endurance no longer has an office in Canada, a company spokesperson confirmed in an e-mail to Canadian Underwriter. The spokesperson added that the carrier “will insure risks in Canada when permissible pursuant to both federal and provincial law.”

Endurance initially announced April 14 a proposal to acquire all of the common shares of Aspen for US$47.50 per Aspen share. The same day, Aspen announced its board of directors unanimously rejected the offer, contending, among other things, that the proposal “undervalues” Aspen and  “represents a strategic mismatch.”

At the time, Endurance’s takeover offer would have given Aspen shareholders a 21% premium over Aspen’s share price as of April 11. Shareholders would have had a choice of all cash, 0.8826 shares of Endurance for each share, or a combination of cash and stock.

Endurance later increased its offer to US$49.50 per share but Aspen announced June 2 its board of directors unanimously rejected that proposal as well.

Then on June 9, Endurance announced, in a filing with the U.S. Securities and Exchange Commission, that it has commenced an exchange offer for all outstanding common shares of Aspen. The same day, Aspen advised shareholders not to take any action until the board of directors makes a recommendation based on that offer.

The Aspen board plans to make a recommendation in an SEC filing within 10 business days. The Aspen board plans to “carefully review the exchange offer in consultation with its independent financial and legal advisors and determine the course of action that it believes is in the best interest of Aspen and it shareholders,” Aspen stated in a press release.

Endurance’s offer expires Aug. 29. In essence, Aspen shareholders are being offered choice of either: US$49.50 cash per Aspen share; 0.9197 Endurance shares per Aspen share; or a combination of US$19.80 cash and 0.5519 Endurance shares per Aspen share. As of June 9, Aspen shares were trading at US$46.40.

On June 2, Endurance had filed a preliminary solicitation statement with the SEC seeking the support of Aspen’s common shareholders to commence a special general meeting, in order to consider a proposal to increase the size of the board (from 12 to 19 members).

It also sought the support of Aspen shareholders for a proposal of a scheme of arrangement by Endurance, which would entail the holding of a court-ordered shareholder meeting. The purpose of such a meeting would be for shareholders to vote on a scheme of arrangement, under Bermuda law, in which Endurance “would acquire all of Aspen’s outstanding common shares on financial terms no less favorable than those contained in its increased proposal.”

As of June 2, Endurance stated it had “not yet made a determination as to whether or not it will put forth an alternative slate of directors at Aspen’s 2015 annual general meeting of shareholders, although it reserves the right to do so.”

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