NEW YORK (The Deal) -- Endurance Specialty (ENH) Tuesday said it would acquire Montpelier Re (MRH) for $1.83 billion in cash and stock, finding a partner less than a year after a hostile bid for another insurance firm was dropped.
Terms of the deal call for Endurance to pay 0.472 shares and $9.89 in cash for each share of Montpelier for total consideration of $40.24 per share, a premium of 5.5% to the target's closing stock price on Monday. The cash portion of the consideration is to be funded via a dividend paid by Montpelier shareholders, with Montpelier holders to own about 32% of Endurance after the merger is consummated.
Funds affiliated with Charlesbank Capital Partners have agreed to vote their Montpelier common share stake in favor of the proposed transaction.
The deal between the two Bermuda-based companies would create a reinsurance specialist with pro forma gross premiums written of $3.6 billion. After the deal closes, total capital at Endurance would increase to $5.5 billion from $3.7 billion. Total cash and invested assets would grow to $9.3 billion from $6.7 billion.
Endurance said it expects to extract more than $60 million in annual costs, saying that the purchase should contribute to earnings immediately.
"Endurance's strategic acquisition of Montpelier represents a compelling value creation opportunity for Endurance's shareholders, with accretion to earnings per share and return on equity," Endurance Chairman and CEO John Charman said in a statement. "The acquisition also provides Endurance with a natural introduction to the business of managing insurance and reinsurance investment products for third-party capital investors."
The deal is the latest in a flood of transactions in the reinsurance market. Canadian insurer Fairfax Financial (FRFHF) said in February it would acquire Brit for £1.22 billion ($1.88 billion), and in January XL Group (XL) announced plans to buy Catlin Group (CNGRY) for £2.7 billion while Axis Capital (AXS) and PartnerRe (PRE) said they would merge to create a company with a pro forma market value of $11 billion.