Legacy acquirer Enstar has written to the board of Watford Holdings offering a revised acquisition offer of $686 million, as well as strongly criticising its handling of previous takeover attempts and subsequent agreement with Arch.
It was confirmed earlier this week that Arch had reached an agreement with Watford to acquire it in an all-cash transaction valued at roughly $622 million.
The news came days after it was reported that Enstar had approached Watford to enter into a non-disclosure agreement and begin due diligence on a potential acquisition.
Enstar had previously delivered a letter to Watford Re’s board indicating its desire to acquire all of the company’s outstanding shares.
But despite the approach from Enstar, it appeared that reports from early September of a potential acquisition of Watford by Arch, had come to fruition.
Now, Enstar has accused Watford of rushing to enter its agreement with Arch and accepting a bid that represented less than a 1% for its own offer.
“The board did not return to Enstar to explore whether it was prepared to increase its bid above $31.10, or even respond to Enstar’s request for expedited diligence to allow for an increased offer,” according to a letter sent to Watford’s board.
“In light of Enstar’s $5 per share increased offer and the clear signal in its second letter, the board’s decision to ignore Enstar and execute the agreement with Arch raises very serious and troubling questions, including whether the board properly discharged its fiduciary duties to act in the best interest of the company.”
Enstar also accuses Watford’s board of executing an agreement that includes a “no-shop” provision without conducting a reasonable pre-signing market check.
“To the contrary, the board cut off any market check by rushing to prematurely and inexplicably sign an agreement with its controlling shareholder, while refusing to engage with Enstar, another strongly interested bidder.”
In its letter Enstar underlines its view that Watford is worth more than the $31.10 per common share offered by Arch and has retained legal advisors to advise with its next steps, “including litigation if it becomes necessary. Our sole interest is to see that shareholder value is maximized.”
Enstar’s revised offer is to acquire 100% of the outstanding common shares of Watford at $34.50 per share, payable in all cash.