Reinsurance News

Arch steps up Watford pursuit with Enstar-backed revised offer

2nd November 2020 - Author: Charlie Wood

Arch Capital and Watford Holdings have agreed a revised acquisition agreement that would see Arch purchase Watford at an increased price of $35 per share, or approximately $700 million.

ArchIt’s worth noting that 9.1% shareholder Enstar has entered into a voting support agreement with Watford and Arch, committing to vote all of its Watford shares in of the transaction.

Enstar had accused Watford of rushing to enter its agreement with Arch when it accepted a bid representing less than a 1% of its own offer.

Reports had initially emerged citing Arch as having already reached an agreement to acquire Watford in an all-cash transaction valued at roughly $622 million.

Days later it was reported that Enstar had approached Watford regarding a non-disclosure agreement, clearing the way for due diligence on a potential acquisition.

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This latest all-cash consideration represents a premium of approximately 96% to Watford’s unaffected closing common share price on September 8.

The transaction is expected to close in the first quarter of 2021, subject to regulation.

Arch will assign its interests and obligations under the merger agreement to a newly formed entity, of which Arch will own approximately 40%.

The funds managed by Warburg Pincus and Kelso & Company will each own approximately 30%.

“We continue to believe in the merits of this compelling opportunity and are pleased to be making this revised offer,” said Marc Grandisson, President and Chief Executive Officer of Arch.

“The increased premium and the addition of Warburg Pincus and Kelso as active investment partners will position Watford to capitalize on its significant value generation potential while ensuring continuity of service for all policyholders.”

“This transaction delivers an attractive premium to our shareholders, and offers Watford the opportunity to fulfill its potential as a private company,” said Jon Levy, President and Chief Executive Officer of Watford.

“This is a significant milestone for us, both in our pursuit of shareholder value as well as for our strategic growth plans. We look forward to deepening our longtime relationship with Arch, and collaborating with our new partners, Kelso and Warburg Pincus.”

Dan Zilberman, Managing Director and Executive Management Group member at Warburg Pincus, added, “We were a founding investor in Arch in 2001 and have followed the company’s development closely since our investment.

“We are excited to partner once again with Arch’s talented management team in a new endeavor. Arch has a compelling plan in place to enable Watford’s continued performance for its policyholders and trading partners.

“We are excited to participate in this plan, and believe that we can be a value added partner by applying our operating and industry resources to enhance Watford’s inherent value proposition.”

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