Validus To IPC Board: Agree To Merger Soon Or Get Out

Validus, in its statement, said it continues to seek a consensual amalgamation transaction with IPC in one of several forms–a contractual agreement with IPC, a stock exchange offer or a previously announced scheme of arrangement (requiring a lower level of shareholder approval at a court-ordered special meeting.)

Ed Noonan, Validus' chairman and chief executive officer said, "Following the overwhelming rejection of the Max transaction on Friday, we are taking steps to enable IPC's shareholders to receive the superior value offered by Validus," referring to a vote by 72 percent of IPC shareholders to reject the Max Capital deal, first proposed in early March.

"We have previously provided IPC with an executed amalgamation agreement with our offer. While we would like to reach an agreement with IPC's Board in view of IPC's statement on Friday indicating its willingness to engage with Validus, our Exchange Offer and Scheme of Arrangement provide alternative paths to complete a transaction, if necessary," he said.

"We initiated these steps prior to the termination of the Max amalgamation agreement with IPC and we will proceed with them even as we seek to reach a consensual agreement with IPC's Board. In addition, we are also now prepared to seek the removal of IPC's Board, if appropriate," he continued.

Under Validus' offer, IPC shareholders would receive $3.75 in cash and 1.1234 Validus voting common shares for each IPC common share, bringing the total deal value to over $1.6 billion.

But IPC contends that the implied value of $29.28 per share is 16 percent below IPC's book value, which it puts at roughly $35 per share.

Kenneth Hammond, chair of IPC, which is the holding company for IPC Re, a monoline property-catastrophe reinsurer, highlighted concern over the value in a press statement and an attached letter to Mr. Noonan this morning.

"We are committed to maximizing value, and we have been involved in a process to evaluate a range of options available to IPC. As part of this process, we will now give consideration to whether a sale of the company, including a sale to Validus, can maximize value for IPC's shareholders," Mr. Hammond said in the press statement.

In his letter, he outlined the various criteria that would need to be met before IPC's board would recommend a sale to Validus, including due diligence and a guarantee that the sale will not be conditioned on the absence of catastrophe losses.

"We consider that any transaction entered into between IPC and Validus should unequivocally commit Validus to purchase IPC regardless of any catastrophe losses or other material adverse change occurring on or after the earlier of the signing of a definitive agreement or June 26, 2009 (the latter being the date on which your exchange offer expires)," the letter said.

For its part, Validus has already identified three candidates to replace members of IPC's board, who would stand for election at a special meeting of IPC shareholders.

Validus' proposed director nominees are:

o Raymond C. Groth, an adjunct professor of business administration at The Fuqua School of Business, Duke University, a position he's held since March 2001. Among other positions, Mr. Groth was previously a managing director of the Mergers and Acquisitions Group (1994 to 2001) at First Union Securities, Inc. (now Wachovia Securities).

o Paul G. Haggis, chairman of Alberta Enterprise Corp., a position he has held since March 2009. Previously, Mr. Haggis served as president and CEO of the Ontario Municipal Employees Retirement System (2003 to 2007) and held top management positions at Princeton Developments Ltd. and the Public Sector Pension Investment Board, among other positions.

o Thomas C. Wajnert, a senior advisor to Irving Place Capital Partners (formerly Bear Stearns Merchant Banking LLC). Among his previous positions, Mr. Wajnert was managing director of Fairview Advisors, LLC, a merchant bank (2002 to 2006) and Principal at Alta Group (2001 to 2002).

Mr. Noonan said Validus is optimistic that it will be able to secure the necessary support of at least 10 percent of IPC shareholders in order to requisition a special meeting for electing new board members.

Validus is filing amended proxy materials with the Securities and Exchange Commission to solicit written requisitions from shareholders of IPC to call the special meeting. At the meeting, in addition to considering the replacement of the IPC Board with the Validus candidates, Validus would seek to eliminate or amend certain provisions in IPC's bye-laws and to bind IPC to the Scheme of Arrangement, if appropriate.

Validus also intends to file a new application with the Supreme Court of Bermuda to seek its approval to convene a court-ordered meeting of IPC's shareholders in connection with the Scheme of Arrangement.