Reinsurance News

Enstar looks to begin due diligence on Watford Re proposal

6th October 2020 - Author: Matt Sheehan

Enstar Group Limited has asked Watford Re to enter into a non-disclosure agreement to let it begin due diligence on a potential acquisition.

enstarLast week, Enstar delivered a letter to the Board of Directors of Watford Re, indicating its desire to acquire all of the company’s outstanding shares.

Now, in a second letter, the company has reconfirmed its “continued interest in a potential transaction.

“We believe that the appropriate next step would be to enter into a non-disclosure agreement to allow us to complete our due diligence in an expeditious manner,” Enstar President Paul O’Shea wrote to the Board of Watford Re.

Enstar added that on completion of due diligence, it is likely that it may be able to increase its offer.

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According to a recent sec filing, Enstar proposed to buy Watford Re outright for $31 per ordinary share at closing, which represents a premium to current market price of 365.1%

As we discussed previously, Arch Capital Group Ltd., Watford’s largest shareholder with a 12.6% stake, reportedly led a consortium of private equity firms to offer around $26 a share for Watford. So, at $31 per share, the Enstar proposal is a significant $5 per share higher.

There have been some calls for the company to be sold due to its recent poor performance, with AM Best placing the firm’s credit ratings on negative watch back in May.

But Enstar says its offer of $31 per share stands, after discussing the proposal with analysts at Morgan Stanley.

Currently, Enstar holds a 9.1% stake in total-return reinsurer Watford after recently increasing its share from the 5% acquired in the first-quarter of 2020.

“We look forward to working with Watford and engaging in next steps towards the agreement of a mutually beneficial transaction that provides a fair price to Watford’s shareholders,” O’Shea concluded.

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