Validus readies to acquire IPC now that Max Capital deal is dead

By Lisa Kerner

Charlotte, N.C., June 15 - Validus Holdings, Ltd. said it is ready to replace the board of directors of IPC Holdings, Ltd. with three Validus candidates if it is unable to reach an agreement to acquire IPC "in a timely fashion."

On Friday, Max Capital Group Ltd. announced it was terminating its merger agreement with IPC after a majority of IPC's shareholders voted to reject the offer.

Max's stockholders voted to approve the deal in which the companies agreed to combine in a stock-for-stock transaction valued at approximately $912 million.

Despite the IPC/Max agreement, Validus began an exchange offer on June 11 to acquire IPC for $3.75 in cash and 1.1234 Validus voting common shares for each IPC common share.

IPC rejected the offer, which ends at 5 p.m. ET on June 26.

Kenneth L. Hammond, IPC's chairman, said on Friday that IPC will review strategic alternatives, including Validus' offer.

"While we would like to reach an agreement with IPC's board in view of IPC's statement on Friday indicating its willingness to engage with Validus, our exchange offer and scheme of arrangement provide alternative paths to complete a transaction, if necessary," Validus chairman and chief executive officer Ed Noonan said in a company news release.

Noonan said he believes Validus has enough support to requisition a special meeting of IPC shareholders in order to elect new board members.

Validus' proposed director nominees are:

• Raymond C. Groth, adjunct professor of business administration at the Fuqua School of Business, Duke University;

• Paul G. Haggis, chairman of Alberta Enterprise Corp.; and

• Thomas C. Wajnert, senior adviser to Irving Place Capital Partners (formerly Bear Stearns Merchant Banking LLC).

IPC outlines deal criteria

IPC, in a letter to Noonan, outlined criteria Validus should meet before IPC's board will recommend a sale to Validus in a negotiated transaction.

According to Hammond, IPC and Validus entered into a confidentiality agreement and IPC provided Validus with an initial due diligence request.

Hammond believes that Validus' current offer "continues to be at a significant discount to IPC's book value."

"We would require that any negotiated transaction with Validus would give IPC the right to perform a proactive market check between signing and closing," Hammond said in an IPC news release.

Also as part of its criteria, IPC wants certainty that a deal with Validus would close, especially in light of the hurricane season, "regardless of any catastrophe losses or other material adverse change occurring on or after the earlier of the signing of a definitive agreement or June 26."

Of the three options presented by Validus - a contractual amalgamation, an exchange offer or a scheme of arrangement - IPC said it will focus on Validus' preferred option, an amalgamation agreement.

Validus would also be expected to cover the expense of the $50 million termination fee under IPC's failed agreement with Max.

Based in Hamilton, Bermuda, Validus provides insurance coverage and reinsurance coverage in the property, marine and specialty lines markets.

IPC, located in Pembroke, Bermuda, provides property catastrophe reinsurance as well as aviation, property-per-risk excess and other short-tail reinsurance.

Specialty insurance and reinsurance provider Max is based in Hamilton, Bermuda.

Mentioned in this article:

IPC Holdings, Ltd. Nasdaq: IPCR

Max Capital Group Ltd. Nasdaq: MXGL

Validus Holdings, Ltd. NYSE: VR

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