CastlePoint maintains Tower Group offer is fair despite shareholder's objection

By Lisa Kerner

Charlotte, N.C., Aug. 20 - CastlePoint Holdings, Ltd. defended its proposed acquisition by Tower Group, Inc. in an Aug. 20 letter to Omega Advisors, Inc. chairman Leon Cooperman.

According to CastlePoint chairman of the board Jan R. Van Gorder, the special committee determined that the proposed transaction is fair to and in the best interests of CastlePoint.

Van Gorder expressed confidence that all of Cooperman's questions about the proposed merger will be answered in the joint proxy statement/prospectus that is expected to be filed within the next few weeks.

In an earlier letter to CastlePoint, Cooperman, a 7.2% shareholder, suggested Tower Group "sweeten the package with a warrant that adds about $2 in value" to gain more support for the transaction.

Cooperman's opposition is not to the merger but to the offer price, according to his letter.

Tower Group agreed to acquire CastlePoint in a cash and stock deal valued at about $490 million, or $12.68 per share, it was previously reported.

Cooperman noted that Tower Group solicited Omega to participate in the private placement of CastlePoint shares in March 2006, making assurances that CastlePoint investors would be independently represented and treated fairly in any subsequent dealings with Tower Group.

The investor, who also has an ownership position in Tower Group, challenged CastlePoint chairman and chief executive officer Michael Lee to prove that the proposed merger is fair to CastlePoint shareholders, it said in Cooperman's letter.

Under the agreement with Tower Group, CastlePoint shareholders will receive 0.47 of a share of Tower Group common stock and cash consideration of $1.83 for each share of CastlePoint common stock.

Tower Group said the exchange ratio is subject to adjustment based on Tower Group's volume-weighted average price per share during a 15-day trading window prior to closing.

It was previously reported that Tower Group owns about 6.7% of the common shares of CastlePoint and intends to vote all of its shares in favor of the merger. Lee agreed to vote all of his shares of Tower Group and CastlePoint in favor of the transaction.

Tower Group is a New York property and casualty insurance company.

CastlePoint is a Hamilton, Bermuda-based holding company that provides property and casualty insurance and reinsurance business solutions to small insurance companies.

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