Catalina and Fairfax to divide American Safety

22-08-2013

Run-off specialist Catalina Holdings (Bermuda) has moved to acquire American Safety Reinsurance (ASRe), a Bermuda subsidiary of American Safety Holdings, which is itself merging with Fairfax Financial Holdings, displacing Tower Group International on the deal.

It had previously been announced that Tower would acquire ASRe for some $59 million upon the completion of the $306 million deal between Fairfax and American Safety Holdings.

Catalina originally submitted a proposal to buy American Safety but withdrew the offer. However, it subsequently agreed terms directly with Fairfax with a cash offer.

Chris Fagan, CEO of Catalina, said: “We expressed our strong interest in acquiring American Safety but it became clear to us that a better option for all was to enter into the agreement with Fairfax to acquire ASRe. We are delighted to have secured an agreement with Fairfax to acquire ASRe which can be quickly and efficiently combined with our existing operations.”

Catalina recently secured a further commitment of $200 million from shareholders. “Catalina is very well positioned to continue developing its portfolio through further acquisition,” Fagan said.

An altered course

The move to acquire ASRe was heralded at the time as a big move for Tower with ASRe’s specialty casualty-focused reinsurance business diversifying its existing portfolio beyond qualifying quota share reinsurance treaty business for Lloyd's syndicates and property retrocessional excess quota share business.

Tower has now terminated its right to acquire ASRe in return for a $5 million payment from Fairfax.

Separately, the company is under pressure following its decision to delay filing its quarterly results while it investigated issues surrounding its merger with Canopius Bermuda.

Tower Re was established in the first quarter of 2013 following the merger between Tower Group and Canopius Holdings Bermuda, which was renamed Tower Group International and became the ultimate parent company.

Tower Group International has received a notification letter from the NASDAQ Stock Market stating that because it has not yet filed its quarterly report on form 10-Q for the period ended June 30, 2013 with the Securities and Exchange Commission, it is not in compliance with the continued listing requirements under NASDAQ Listing Rule 5250(c)(1).

When Tower announced the delay, which also meant cancelling its scheduled conference call around its results, it said it was because management had concluded additional time was needed to: “Review matters relating to the estimate of its loss reserves and, primarily due to the integration of the Canopius Bermuda merger, its allocation of goodwill and certain tax accounts. The company is working to resolve these matters with the assistance of outside professionals.The company cannot currently predict the length of time of its review.”

Tower said the NASDAQ notice has no immediate effect on the listing or trading of its common stock. Under NASDAQ listing rules, it has 60 days to submit a plan to NASDAQ to regain compliance with the applicable listing rule.

Law firm Todd M. Garber has said it is investigating potential claims against Tower Group International concerning possible violations of federal securities laws around statements issued by the company between May 9, 2011 and August 7, 2013. The investigation is related to allegations the company misrepresented or failed to disclose that Tower's internal and financial controls were inadequate.

American Safety, Catalina, Fairfax, M&A, Bermuda, reinsurance, insurance