NEW YORK (TheStreet) -- Montpelier Re Holdings (MRH) shares are up 4.5% to $39.87 in early market trading on Tuesday after the reinsurance company was purchased by Endurance Specialty Holdings (ENH) for $1.83 billion in cash today.
The deal values Montpelier at about $40.24 per share, a 5.5% premium on the stock's previous closing price and gives Endurance Specialty a chance to increase its presence into the Lloyd's of London underwriting business, according to Reuters. Last year Endurance unsuccessfully attempted to buy Aspen Insurance Holdings in an effort to expand in the U.K. based global insurance market.
Montpelier shareholders will own about 32% of the combined company with the deal expected to be finalized in the third quarter this year.
Montpelier Re is a Bermuda-based company that provides customized and innovative insurance and reinsurance solutions to the global market.
TheStreet Ratings team rates MONTPELIER RE HOLDINGS as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate MONTPELIER RE HOLDINGS (MRH) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its closing price of one year ago, MRH's share price has jumped by 28.25%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MRH should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- Although MRH's debt-to-equity ratio of 0.29 is very low, it is currently higher than that of the industry average.
- Net operating cash flow has significantly increased by 991.89% to $33.00 million when compared to the same quarter last year. In addition, MONTPELIER RE HOLDINGS has also vastly surpassed the industry average cash flow growth rate of 5.97%.
- The gross profit margin for MONTPELIER RE HOLDINGS is rather high; currently it is at 58.57%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, MRH's net profit margin of 35.03% significantly outperformed against the industry.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Insurance industry and the overall market on the basis of return on equity, MONTPELIER RE HOLDINGS has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full analysis from the report here: MRH Ratings Report