Endurance has announced that it is increasing the consideration in its proposal to acquire Aspen from $47.50 to $49.50 per share in cash and Endurance common shares.
The highly compelling value for Aspen common shareholders includes:
• a 25.7 percent premium to Aspen’s unaffected closing share price of $39.37 on April 11, 2014;
• a 19.5 percent premium to Aspen’s unaffected all-time high share price of $41.43 on December 31, 2013;
• 1.16x Aspen’s March 31, 2014 diluted book value per share and 1.21x Aspen’s December 31, 2013 diluted book value per share; and
• 11.8x 2014 consensus Street earnings estimates for Aspen.
In addition to the highly attractive premium and meaningful cash component of Endurance’s increased proposal, the proposal is structured to be tax-free to Aspen common shareholders with respect to the Endurance common shares they receive in the transaction.
John R. Charman, Endurance’s chairman and CEO, says, “This proposal significantly increases the already highly attractive premium provided by our initial proposal and provides increased certainty to Aspen’s shareholders. It also includes a meaningful cash component for an offshore insurance industry transaction, and provides Aspen shareholders the opportunity to participate in future value created by a stronger and more profitable company.”
Consistent with Endurance’s continued desire to complete a transaction with Aspen on a consensual basis, this increased proposal was made privately to the Aspen board of directors on May 7th, 2014; however, on May 12th, 2014, the Aspen board communicated to Endurance, through its financial advisor, that it was rejecting Endurance’s increased proposal, and that it was not interested in negotiating with Endurance.
Charman continues, “We will not be deterred by an entrenched board and management that refuse to engage productively on the merits of our compelling proposal. The actions we have announced today provide a path for our respective shareholders to realize the substantial benefits of the combination of Endurance and Aspen. We will continue to pursue and execute upon these and other available means to reach a successful outcome.”
It is also launching several actions to expedite the transaction. The first action involves filing a preliminary solicitation statement with the US Securities and Exchange Commission, seeking to convene a special general meeting with Aspen’s common shareholders with regards to a further proposal that would increase the size of Aspen’s board of directors from 12 to 19 members.
If this proposal is approved, a majority of Aspen’s directors – its three Class II directors and the seven individuals appointed to fill the newly created vacancies – would stand for election at Aspen’s 2015 annual general meeting, and Aspen’s shareholders would have the ability to hold the board directly accountable by replacing a majority of the board of directors at that time. Endurance has not yet made a determination as to whether or not it will put forth an alternative slate of directors at Aspen’s 2015 annual general meeting of shareholders, although it reserves the right to do so.
The second action to be taken by Endurance involves proposing a scheme of arrangement to Aspen’s common shareholders by which they would have to vote, under Bermuda law, pursuant to which Endurance would acquire all of Aspen’s outstanding common shares on financial terms no less favourable than those contained in its increased proposal.
If Endurance receives the support of holders of at least 15 percent of Aspen’s outstanding common shares for this action, Endurance intends to apply to the Supreme Court of Bermuda to order a court-sanctioned meeting as described above. “Aspen shareholders’ support for these proposals will clearly demonstrate to Aspen’s board and management that the will of the true owners of the company is to make this transaction a reality,” says Charman.
The third action is the commencement of an exchange offer for all Aspen common shares reflecting the same economic terms as its increased proposal.
Endurance also announced that it has entered into a commitment letter with Morgan Stanley pursuant to which Morgan Stanley has committed to provide a $1.0 billion bridge loan facility to fund, together with cash on hand at Endurance, the cash portion of the consideration payable to Aspen’s common shareholders.
This commitment replaces the equity commitment letter previously announced by Endurance, which has been terminated with the mutual consent of Endurance and the equity investors. Endurance’s increased proposal is not subject to a financing condition.
“The transaction with our equity investors was developed in the context of a friendly, negotiated transaction with Aspen’s board of directors,” says Charman. “We fully expected that, in light of the clear strategic and financial benefits of our proposal, the Aspen board would have engaged with us long ago.”
He concludes, “However, since Aspen’s board and management have refused to engage or negotiate with us in any way whatsoever, we were compelled to take the additional actions we are announcing. We thank CVC for its continued support of us and the proposed transaction.”
Endurance, Aspen, takeover, increase, Charman, reinsurance