JLR Photography /
21 July 2014News

Deutsche Bank: Aspen takeover becoming less likely

Aspen’s investors seem to believe that Endurance will not succeed in its bid to buy the company, analysts at Deutsche Bank have said in a research note.

The investment bank argues that Aspen’s increased share price, since Endurance first made its offer, has more to do with Aspen’s performance and a general improvement in sentiment in the sector more than it does with the Endurance bid.

Additionally, Deutsche Bank believes that the fact that proxy vote recommendation services ISS and Glass Lewis advised Aspen shareholders against the deal makes it increasingly likely that Endurance might soon withdraw its offer.

Deutsche Bank explains that while Aspen’s share price is up 10.4 percent since Endurance announced its desire to buy Aspen on April 14th, this is a reflection of broad equity market performance and an improvement in Aspen's operating results.

“We believe shares of Aspen would have likely appreciated nearly as much without Endurance's bid (worth $49.29 today). We believe Aspen's current stock price suggests only modest upside, supporting our hold rating.”

It also notes that peers of Aspen with improving EPS outlooks have appreciated nearly as much in the three months following Endurance’s announcement. While Aspen saw strong 1st quarter results and pre-announced strong 2nd quarter results, several peers have seen similar significant upward earnings revisions –including Allied World, Montpelier and Platinum – and their stock prices have been impacted favourably to a similar degree.

Deutsche Bank notes: “As such, we don’t expect significant downside risk if Endurance fully withdraws its bid.”

“With proxy vote recommendation services ISS and Glass Lewis advising Aspen shareholders against Endurance’s tactics aimed at superseding the opinion of Aspen’s board and management, we believe Endurance management might soon withdraw its offer,” it says.

It concludes: “Following these events, we believe Aspen’s ‘takeout price’ may be considerably higher than a potential buyer could afford.”