Validus Again Ups Its Bid For IPC

The tug of war in Bermuda between the suitors over IPC Holdings and its operating subsidiary, IPC Re, a monoline property-catastrophe reinsurer, started when Validus delivered its first rival offer to IPC's board in late March, with a stock deal then valued at $1.68 billion.

Terms of the original offer called for each IPC common share to be exchanged for 1.2037 Validus common shares.

Validus Holdings said yesterday that it is now offering to pay IPC shareholders $3.75 in cash for each IPC common share and 1.1234 Validus voting common shares.

Last month, Validus announced its first move to boost its offer, promising $3 in cash to each IPC shareholder and 1.1234 Validus voting common shares for each IPC common share.

According to Validus, the latest increase –adding 75 cents to the cash component– would provide IPC shareholders with a total consideration of $30.67 per IPC share based on Validus' closing price last Friday–a 9.8 percent premium to IPC's closing price that day.

Validus also said the total represents a 24.9 percent premium based on the closing prices of Validus and IPC on March 30, which was the last trading day before the announcement of Validus' initial offer.

In a statement, Ed Noonan, Validus' chairman and chief executive officer, said, "This significant cash increase maintains the clear superiority of Validus' offer."

"Unlike the proposed amalgamation with Max, the Validus offer provides a substantial premium to IPC shareholders, a significantly larger cash component, and the opportunity to benefit from being part of a much stronger, far more profitable, and well diversified company," he said.

For its part, Max claims the Validus deal is risky because there are many obstacles in the way of closing the deal, and because it doesn't offer the diversification benefit of combining with a writer of long-tailed casualty business as the Max deal does.

Validus writes short-tailed reinsurance through its operating subsidiary, Validus Re in Bermuda, and short-tailed insurance through Talbot Holdings in London.

In a statement yesterday, W. Marston Becker, chairman and CEO of Max Capital said, "Today's latest iteration of the Validus hostile takeover offer, like each of the others, fails to reach the level of financial and strategic benefits afforded to IPC and Max shareholders by the IPC-Max merger."

He added that the IPC-Max deal, "which can close next week, offers more book value per share to IPC shareholders and a significant cash component," referring to the fact that IPC and Max agreed to add a cash consideration of $2.50 per share to the original merger agreement last week.

The original deal called only for holders of Max common stock to receive that 0.6429 IPC shares for each Max share.

The deal amendments announced last week call for the payment of two cash dividends to IPC shareholders–$1.50 per share to IPC shareholders of record as of June 15, and an additional $1 per share in cash payable to shareholders following closing of the transaction.

Under terms of the amended deal, Max shareholders would also receive a cash dividend of $1 per share in cash for each share of IPC following the closing of the transaction, which is equal to 64 cents for each share of Max prior to exchange from the closing of the transaction.

Mr. Becker said, "The Validus proposal is simply a promise–a promise to provide an overvalued currency that offers shareholders no diversification and a hope that you can double up your catastrophe exposure and see no loss activity."

The official verdict from shareholders should come at Friday's IPC and Max shareholders meetings.

Max is urging IPC shareholders to vote the "white" proxy card "for" the IPC-Max transaction, while Validus points them toward the "gold" card "against" that deal.