Scheme of arrangement tactics could become more commonplace as the somewhat messy attempted aggressive takeover of Aspen by Endurance again highlighted the way in which these tactics can potentially be used to force through such a deal.
In Bermuda, Validus Holdings was the first company to use a scheme of arrangement to try to push through a takeover—in that case of IPC Holdings. The tactic was again used unsuccessfully in Endurance’s extremely high profile bid to take over Aspen.
“As soon as I heard of Validus’ plan to use a scheme to push through the acquisition of IPC I thought ‘wow, how do they think they will get away with that?’ It was really unusual. My reaction was ‘that is way out of the park’,” said Mike Morrison, managing director, advisory, at KPMG in Bermuda.
A scheme of arrangement has traditionally been viewed as being an extremely aggressive move, one that although possible under company law, has rarely been used as a takeover tactic—until now.
The question being asked, as mergers and acquisitions (M&A) in the re/insurance industry picks up pace, is will it be used in the future as a tool to force through a takeover against the will of the board of the target company?
“A hostile scheme of arrangement is an aggressive tactic and is all about putting pressure on the board of the target company. The question is: will this type of tactic be used more in the future?” asks Morrison.
“In a hostile bid situation like those described earlier I can see it being used again—hostile bids involve pressuring the board and attempting to access shareholders directly.”
To read the whole feature on the Bermuda:Re+ILS website click here.
M&A, KPMG, Aspen, Endurance, Validus Holdings, Bermuda, Reinsurance, IPC Holdings, Mike Morrison