DOW JONES NEWSWIRES
A fight between two suitors over reinsurer IPC Holdings Ltd.
(IPCR) has escalated, as the dueling companies point to different
accounting conventions to assert which deal is more desirable to
shareholders.
In its latest letter to IPC's board, Validus Holdings Ltd. (VR)
said Monday it disagreed with Max Capital Group Ltd.'s (MXGL) basis
for valuation, alleging it modified its description of its
calculation of pro forma book value per share.
Validus claims that Max Capital's calculation described what an
IPC shareholder would receive on a standalone basis from either
Validus or Max Capital, rather than its own approach of a
comparison of what an IPC shareholder would own as a result of
either transaction.
Last week, Validus made an unsolicited offer to buy IPC, a
proposal it claims is better for IPC shareholders than that
company's merger agreement with Max Capital. IPC, which was formed
by former American International Group Inc. (AIG) Chairman Maurice
"Hank" Greenberg in 1993 and has been public since 1996, now finds
itself in a triangle of reinsurance companies looking to pair up in
an operating environment that puts a premium on the greater capital
cushion and cost savings that scale provides.
Earlier Monday, Max Capital stood by its calculations on the
book value of IPC's shares, saying its figures were "true and
correct," as it consulted with financial advisers and Securities
and Exchange Commission counsel.
Max Capital said its offer allows IPC shareholders to compare
the value received under each transaction on an "apples-to-apples"
basis.
"Since Validus initially made its below-book value, unsolicited
takeover offer for IPC, it has demonstrated a lack of understanding
of what is important to the shareholders of IPC in allowing them to
assess the relative value being delivered by Max versus Validus,"
said Max Capital Chairman and Chief Executive W. Marston "Marty"
Becker on Monday morning.
Last month, Max Capital, which writes property and casualty
business, accepted IPC's $16.34-a-share offer to acquire it, less
than the $16.50 closing price the day before the deal was
announced. That deal would value Max Capital at $912 million. IPC
shareholders would own 59% of the combined company, though it would
retain the Max Capital name and be run by Becker.
Validus is seeking to disrupt the deal with its own offer to
exchange 1.2037 Validus common shares for each IPC share. Based on
its closing prices on March 30, the day before the offer was made
public, the offer valued IPC's common equity at $1.68 billion, or
$29.98 a share, and represents an 18% premium.
Validus' shares were unmoved in after-hours trading Monday at
$23.18, while IPC's shares were even at $26.40 and Max Capital's
were at $16.76.
-By John Kell, Dow Jones Newswires, 201-938-5285, john.kell@dowjones.com