IPC Board Recommends Merging With Max

NU Online News Service, April 8, 2:29 p.m. EDT

IPC Holdings Ltd. board said it would stay on track with its decision to merge with Max Capital Group Ltd., spurning an offer from Validus Holdings Ltd.

The Hamilton, Bermuda-based insurer said yesterday that its board of directors voted unanimously to reaffirm its recommendation that IPC shareholders vote to approve the definitive amalgamation (the name for a stock for stock acquisition transaction under Bermuda law) between IPC and Max.

"The IPC board continues to believe that the combination with Max will create a stronger and more diversified underwriting franchise with less correlated risk," Kenneth L. Hammond, IPC's chairman of the board, said in a statement.

Mr. Hammond added, "Our newly combined entity will have the scale and flexibility to better manage capital and take advantage of attractive opportunities in the property-casualty marketplace, as and when they arise.

"In addition, our transaction with Max has more certainty and a clearer path to close, and we expect it to close more quickly than any Validus transaction," he added.

Besides the Max merger giving it more diversification and creating more value for IPC's shareholders, IPC said a deal with Validus is "less certain" and riskier for shareholders, taking longer to close.

The company said it would need to go through a due diligence process with Validus, if shareholders first reject the Max deal, and such a deal would not close until the middle of the hurricane season. Merging with Max would be completed at the start of the season and has already received regulatory approvals.

Max and Validus, both Bermuda-based companies, have been engaged in a battle over acquiring IPC since the end of March, when Validus made an unsolicited bid to acquire IPC. Max and IPC had entered into a merger agreement at the beginning of the month.

Earlier this week Validus claimed that Max had miscalculated the value of the offer to IPC, a claim Max summarily rejected.

The Max and IPC deal is valued at $900 million and would give IPC shareholders majority interest.

By contrast, the Validus deal is valued at $1.68 billion, but IPC shareholders would be minority owners.

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 would be a change in the recommendation by one party's board to its shareholders.