Investment firm Sixth Street will acquire Enstar Group Ltd., the Bermuda-based legacy acquisition specialist, for $5.1 billion, according to Enstar in an announcement.

Liberty Strategic Capital (a private equity company led by former Treasury Secretary Steven Mnuchin), J.C. Flowers and other institutional investors are also participating in the deal, Enstar said.

Enstar shareholders will receive a total of $338.00 per share in cash, representing a total equity value of $5.1 billion.

The transaction has been unanimously approved and recommended to Enstar’s shareholders by its board of directors, is expected to close in mid-2025, subject to approval by shareholders, regulators and other customary closing conditions.

Following the close of the transaction, Enstar’s common stock will no longer be publicly listed and it will become a privately held company, which will continue to operate under the Enstar name and maintain its current business strategy.

The agreement includes a 35-day “go-shop” period that expires on Sept. 2, 2024, which permits Enstar’s board of directors and advisers to solicit alternative acquisition proposals from third parties.

“Over the past 30 years, Enstar has built a strong position in the legacy market founded on our exceptional scale and track record, pricing and claims expertise, and entrepreneurial culture,” said Enstar Chief Executive Officer Dominic Silvester in a statement. “This transaction provides a full liquidity event for shareholders and is a testament to the strength of our team. We believe this is the best next step for our shareholders and we look forward to this exciting new chapter.”

“Enstar has a proven track record of delivering innovative legacy P/C solutions and capitalizing on attractive opportunities in the reinsurance market, while maintaining a conservative balance sheet and strong risk management culture,” said Michael Muscolino, co-founder and partner at Sixth Street. “As an existing investor in Enstar, we have a deep respect for the business Enstar’s management team has built and look forward to continue supporting the company’s current strategy.”

Ratings Agency Responses

Ratings agency AM Best commented that the credit ratings of StarStone Insurance Bermuda Ltd. and its subsidiary, StarStone Insurance SE in Lichtenstein, are unchanged following the announcement that their parent company, Enstar Group Ltd. entered into the definitive merger agreement under which Sixth Street will acquire Enstar.

AM Best does not expect the transaction to result in any material changes to StarStone’s business operations or rating fundamentals. Support that the companies receive from their ultimate parent, Enstar, is also expected to be unaffected.

Fitch Ratings also does not expect any material change to Enstar’s business and financial profile and operating strategy following the acquisition. “While Fitch generally views financial flexibility to be more limited under private ownership, Sixth Street provides flexibility through long-dated capital from its open architecture multimanager investment platform.” Fitch noted that Sixth Street originally made an initial minority investment in Enstar in November 2023.

Fitch said Enstar has been a NASDAQ publicly traded holding company since 2007 with a history that dates back to 1993 when Castlewood Ltd. was launched to provide runoff services for the industry. “Fitch last reviewed Enstar on June 4, 2024 and affirmed all of its ratings with a Stable Outlook. Enstar’s ratings reflect its solid business franchise acquiring and managing non-life runoff companies, strong profitability derived from consistent favorable reserve development, very strong capitalization and reasonable financial leverage. Offsets to these positives include the company’s runoff risk profile.”

Goldman Sachs & Co. LLC is acting as financial adviser to Enstar and Paul, Weiss, Rifkind, Wharton & Garrison LLP and Hogan Lovells US LLP are acting as legal advisers. Ardea Partners LP, Barclays PLC and J.P. Morgan Securities LLC are acting as financial advisers to Sixth Street and Simpson Thacher & Bartlett LLP, Debevoise & Plimpton LLP and Cleary Gottlieb Steen & Hamilton LLP are acting as legal advisers.

Enstar offers capital release solutions through its network of group companies in Bermuda, the United States, the United Kingdom, Continental Europe, Australia, and other international locations. As a legacy acquisition specialist, Enstar has acquired 117 companies and portfolios since its formation in 2001.

Founded in 2009, Sixth Street is a San Francisco-based global investment firm with over $75 billion in assets under management and committed capital.

Source: Enstar Group