Kiln Ltd. To Be Acquired For $893 Million

Japan-based insurance giant Tokio Marine & Nichido Fire Insurance Company Ltd. (TMNF) said they had reached agreement to acquire London-headquartered Kiln Ltd. for ?442.2 million ($893.8 million at current exchange rates).

According to the companies, the transaction will be implemented under Bermuda law, where Kiln is incorporated. They said the acquisition represents a premium of approximately 40.8 percent over Monday's closing of 106.5 pence per share price before news of sale discussions was announced.

A.M. Best greeted the announcement by putting Kiln ratings under review with positive implications.

Kiln's principal United Kingdom operating company--R J Kiln & Company Ltd.--is managing agent to four syndicates at Lloyd's of London, and, in terms of capacity, is the fourth-largest agency trading in the Lloyd's insurance market.

In addition to Bermuda and London, Kiln has operations in Hong Kong, Singapore, South Africa and Belgium.

TMNF said it sees Kiln as playing a pivotal role in the expansion of its international underwriting operations and in enhancing its existing overseas activities. The company said it intends to retain "the culture, identity and brand of Kiln."

TMNF said further that it will work with Kiln management to develop a joint growth strategy and create a major underwriting platform for international commercial insurance and reinsurance in the United Kingdom, United States, Continental Europe and Asia.

The Kiln board said it will recommend approval of the acquisition at a special general meeting, and a shareholder circular setting out the details of the acquisition and the approval procedures will be sent to Kiln shareholders shortly. The acquisition is expected to become effective during the first quarter of 2008, Kiln said.

Kiln said its previously announced capital return is no longer expected to proceed, but the sale of W.R. Berkley Insurance (Europe) Ltd is due to continue.

The financial adviser to TMNF in the deal is FPK, and Lexicon Partners is acting as financial adviser to Kiln.

TMNF President Shuzo Sumi said in a statement his company has had a close relationship with Kiln Group since its formation in 1962, and believes "we share the same fundamental values and business philosophy."

He called the agreement an "important milestone in our stated strategy to expand internationally, and we believe Kiln--with its underwriting expertise, skilled employees and strong brand--represents the perfect partner."

Kiln Group CEO Edward Creasy called the acquisition an "excellent outcome for Kiln, its shareholders and employees."

Kiln's aims will be helped by becoming part of a major international group, "which recognizes the strength of our brand, respects our existing culture, and which will provide exciting opportunities for Kiln's employees," said Mr. Creasy.

He added that the company believes that TMNF, "with its established national and international presence, its strong balance sheet and matching values, will provide Kiln with excellent opportunities in all these respects. We look forward to an exciting future working with TMNF."

Millea, the ultimate holding company of the TMNF Group, is listed on both the Tokyo and Osaka Stock Exchanges. Consolidated net premium income of the TMNF Group for the fiscal year 2006 was approximately ?9 billion ($18.2 billion) with net profits of approximately ?390 million ($788 million).

Millea was formed in April 2002 as the holding company for the insurance businesses of two then separate insurance companies: Tokio Marine and Fire Insurance Company Ltd. ("Tokio Marine"), and Nichido Fire and Marine Insurance Company Ltd. ("Nichido Fire").

Millea operates in the general insurance, reinsurance and life insurance sectors globally, with a presence in approximately 40 countries.

A..M. Best Co. said it placed the bbb plus issuer credit ratings of Kiln Ltd and Kiln (UK) Holdings Limited) under review with positive implications. The firm said it takes the view that the acquisition may improve Kiln's financial flexibility.

Best said ratings of Lloyd's Syndicate 510, which is managed by R.J. Kiln & Co Ltd, remain unchanged.

This article updated Dec.17, 9:38 a.m.