Endurance Specialty Holdings Ltd. announced Monday that it has delivered a proposal to the board of directors of Aspen Insurance Holdings Ltd. to acquire all of the common shares of Aspen for $3.2 billion, or $47.50 per Aspen share, with a combination of cash and Endurance common shares.

The combination of the two “Class of 2001” Bermuda specialty insurance and reinsurance companies—each of which was part of the Bermuda wave of development after the World Trade Center attacks—would create a company with over $5 billion of combined annual gross premiums written and $5 billion of pro forma common shareholders equity.

The combined book would be diversified across products and market, the Endurance announcement notes.

The statement indicates, however, that Aspen’s board has repeatedly rebuffed attempts to “engage in confidential and friendly discussions” that Endurance has proposed since January.

John R. Charman, Endurance’s chairman and CEO, said, “This transaction is, quite simply, a unique opportunity to deliver value to shareholders of both Aspen and Endurance while creating a new global leader in the industry.

“The proposal offers up-front value for Aspen’s shareholders, who will receive a substantial premium for their shares, as well as the opportunity to participate—along with Endurance’s shareholders—in future value created by a stronger and more profitable company, he said.

Endurance’s proposal provides Aspen shareholders with:

• A 21 percent premium to Aspen’s closing share price on April 11, 2014.
• A 15 percent premium to Aspen’s all-time high share price of $41.43 on Dec. 31, 2013.
• 1.16-times Aspen’s Dec. 31, 2013 diluted book value per share.
• 13.4-times 2014 consensus Street earnings estimates for Aspen.

Each Aspen shareholder will have the right to receive for their Aspen shares, at their election: all cash ($47.50 per Aspen share); all Endurance common shares (0.8826 Endurance shares for each Aspen share); or a combination of cash and Endurance common shares. The election will be subject to a proration mechanism to achieve an aggregate consideration mix of 40 percent cash and 60 percent Endurance common shares.

“The specialized businesses of Endurance and Aspen, such as Endurance’s market-leading agriculture insurance business and Aspen’s Lloyd’s operations, are highly complementary, and together we will create a company with increased scale, an attractive diversified platform across products and geographies, and greater market presence and relevance,” said Charman in today’s statement. He also referred to the combined company’s strong balance sheet and capital position, as well as its potential enhanced ability to pursue growth opportunities and withstand volatility.

Attached to today’s statement is a copy of Charman’s letter to Aspen’s board of directors, dated April 14.

“As you know, we have been trying since late January to engage with Aspen in a confidential and friendly dialogue regarding a combination of our two companies and have previously made a specific written proposal that offers your shareholders a substantial premium valuation. Since you and your management have refused, despite our repeated attempts, to engage in any discussions with us regarding the compelling value proposition this transaction presents for your shareholders, we have no choice but to advise them of our proposal directly, which we are doing this morning,” the letter begins.

The letter, which lays out the terms of the proposal and key strategic and financial benefits, indicates Endurance believes that “key members of the Aspen management team, underwriters and employees will be critical to the combined success” of the going-forward business, and that headquarters of the combined company would be in Bermuda, with significant presence maintained in London, New York and other key markets.

Source: Endurance Specialty Holdings