Judge Sees Little Hope For Validus IPC Bid

NU Online News Service, June 1, 3:49 p.m. EDT

Validus Holdings' hostile takeover bid for IPC Holdings does not appear to have much support from IPC stockholders, a Bermuda judge said last week.

Despite these and other negative comments coming from the Bermuda Supreme Court last week, Validus insisted that it had come out ahead in a ruling of its "Scheme of Arrangement" to acquire all shares of IPC.

Prior to the rival bid from Validus, IPC's board agreed to merge with Max Capital--a move that IPC stockholders will be asked to approve on June 12.

IPC after the latest court action claimed the court had dismissed the Validus scheme of arrangement for a takeover, but Validus countered that the court "rejected IPC's primary contention that the court did not have jurisdiction to sanction a scheme of arrangement without approval of IPC's board, and found that a scheme of arrangement could be approved on behalf of IPC by its shareholders acting at a general meeting."

Both agreed that the court declined Validus' request to order a meeting between it and IPC's shareholders in advance of the scheduled June 12 company meeting on the merger with Max.

Bermuda Chief Justice Richard Ground wrote that the court does have jurisdiction to entertain Validus' application and sanction the scheme. But he added his power to order a meeting is "entirely discretionary," and to that end, he said, "I have no doubt that I ought not to do so in the circumstances of the present case."

Among his reasons, Justice Ground said it remains an "unprecedented course to embark upon a hostile bid by way of a scheme in the teeth of the board's opposition." He added there are severe practical difficulties in effecting such a scheme.

Aside from practical difficulties, he said he has seen no real and solid indication of independent shareholder support for Validus' scheme.

Peter Hill, Max spokesman, said, "The Validus spin is that the court did not say it didn't have standing or that its scheme couldn't work. But the court declined to force the meeting, and that is what they actually needed."

Chuck Burgess, spokesman for IPC, said it is telling that the court ordered Validus to pay IPC's legal costs.

A spokesman for Validus did not immediately return a call.

Validus announced May 18 that it had increased its offer per IPC share to $3 in cash and 1.1234 Validus voting common shares.

Max Capital and IPC have said under their proposed amalgamation agreement that Max stockholders will receive 0.6429 IPC shares for each Max share. The deal value exceeded $900 million for the more than 56 million outstanding Max shares. IPC shareholders would own the majority of the resulting company--approximately 58 percent, with Max shareholders owning about 42 percent.

The Validus offer has Validus shareholders owning a greater portion of the combined company.