Tower Group International, Ltd., has entered into a merger agreement with ACP Re Ltd., a Bermuda-based reinsurance company, and a wholly-owned subsidiary of ACP Re, a merger sub, pursuant to which it is expected that the merger sub will merge with and into Tower, with Tower as the surviving corporation in the merger and a wholly owned subsidiary of ACP Re Ltd.
The transaction is expected to close by the summer of 2014. The controlling shareholder of ACP Re Ltd. is a trust established by the founder of AmTrust Financial Services, Inc., National General Holdings Corporation (“NGHC”), and Maiden Holdings, Ltd.
Under the terms of the merger agreement, at the effective time of the merger, each outstanding share of Tower's common stock, par value $0.01 per share, following the settlement of all outstanding equity awards, will be converted into the right to receive $3.00 in cash, with an aggregate value of approximately $172.1 million.
Concurrently with the execution of the merger agreement, several subsidiaries of Tower have entered into cut through reinsurance agreements, pursuant to which a subsidiary of AmTrust and a subsidiary of NGHC will reinsure Tower's new and renewal commercial lines or personal lines policies, as applicable, and have each acquired a 10-day option to reinsure on a prospective basis not less than 60 percent of the unearned premium reserve relating to Tower's in force commercial lines or personal lines business, as the case may be. Tower will receive a 20 percent ceding commission from AmTrust or NGHC on all Tower premiums that are subject to the cut through reinsurance agreements.
The merger agreement was unanimously approved by the respective boards of directors of ACP Re and Tower, subject to certain conditions.
The lead financial advisor to Tower on the transaction was J.P. Morgan Securities LLC. Tower also received financial advice from BofA Merrill Lynch.
Michael H. Lee, the chairman, president, and chief executive officer of Tower, who beneficially owns approximately 4.2 percent of the issued and outstanding common stock of Tower as of January 3, 2014, entered into a support agreement pursuant to which he has agreed to vote his shares in favor of the merger.
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Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].