Tower Group has announced a merger with privately-held and Bermuda-based ACP RE, with the new entity set to operate under the Tower name but as a subsidiary of ACP Re.
The transaction is expected to close by the summer of 2014, subject to regulatory and shareholder approval. The deal was unanimously supported by the directors of both ACP Re and Tower. ACP Re is controlled by a trust comprising AmTrust Financial Services, National General Holdings Corporation and Maiden Holdings.
Pursuant to the terms of the agreement each outstanding Tower share of common stock will be converted into the right to receive $3 in cash with an aggregate value of $172.1 million, following the settlement of outstanding equity awards.
Both parties face termination rights if they break from the deal. Tower has agreed to cover ACP Re’s expenses up to $2 million should it chose to sever the deal and to pay ACP Re a termination fee of $8.18 million, net of any transaction expenses it has reimbursed.
Several Tower subsidiaries have also entered into Cut Through Reinsurance Agreements. Through this arrangement a subsidiary of AmTrust and NGHC will “reinsure Tower's new and renewal commercial lines or personal lines policies, as applicable, and have each acquired a 10-day option to reinsure on a prospective basis not less than 60 percent of the unearned premium reserve relating to Tower's in force commercial lines or personal lines business, as the case may be. Tower will receive a 20 percent ceding commission from AmTrust or NGHC on all Tower premiums that are subject to the Cut Through Reinsurance Agreements.”
Tower, ACP Re, merger, M&A