Two Bermuda insurers continued their fight to acquire IPC Holdings Inc. with a letter from Validus Holdings Ltd. saying the Max Capital Group Ltd. overstated the financial benefit IPC shareholders would receive by accepting its offer.
A letter to the board of Bermuda-based IPC from Validus Chairman and Chief Executive Officer Edward J. Noonan, dated Sunday, charged that Max Chairman and CEO W. Marston "Marty" Becker overstated the value IPC shareholders would receive from a deal with Max over his company's offer.
Validus said Max's claim that its deal would deliver 29 percent more tangible book value for IPC shareholders is incorrect and needs to be restated. Mr. Noonan claims that Max's calculation "understates the pro forma IPC share of Validus tangible book value per share by $2.74."
The company added that this difference in value will require insurer Max to make an amended filing with the Securities and Exchange Commission.
Today, Max called Validus' claim "incorrect and misleading," saying its calculations are correct and that the deal does give shareholders more than 29 percent premium over Validus' offer.
Max said its offer to IPC translates into $33.83 a share in tangible book value--"a 29.2 percent premium versus $26.19 delivered by Validus."
"One has to question whether IPC shareholders are being well served by the nonsubstantive claims being initiated by Validus," said Mr. Becker.
"The conclusion remains clear--a combination with Max provides greater underlying value to IPC's shareholders today, with true diversification of underwriting exposures and without an overconcentration in short-tail catastrophe oriented business, and will result in greater upside for IPC shareholders compared to the hostile takeover proposal by Validus," the company said.
Max and IPC entered into a stock-for-stock deal in early March that is valued at over $900 million. If concluded, IPC shareholders would own 58 percent of the combined company and Max shareholders 42 percent.
Validus made an unsolicited bid for IPC last week in a stock-for-stock deal (called an amalgamation under Bermuda law) valued at $1.68 billion.
Under that deal, Validus shareholders would control 57 percent of the combined company and IPC would own 43 percent.
The deals are subject to approval by shareholders and Bermuda insurance regulators.
Both Max and Validus say they offer business diversification benefits. A combination with Max would bring liability business into the mix, while Validus deals in short-tailed business from Validus Lloyd's operation, Talbot.
An SEC filing says the IPC and Max agreement can be terminated under certain conditions, one of which might be a change in the recommendation by one party's board to its shareholders.
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