Lancashire Agrees To Acquire Cathedral Capital

August 10, 2013

Bermuda-based Lancashire Holdings Limited has entered into conditional agreements to acquire the entire issued and to be issued share capital of Cathedral Capital Limited, a privately owned Lloyd’s insurer, from Alchemy Partners and Cathedral management, together with loan notes issued by Cathedral’s subsidiary, Cathedral Capital [Investments] Limited for £266m, representing a multiple of 1.60x net tangible assets of Cathedral as at 31 March 2013.

The consideration for the Acquisition will be satisfied by the payment of £266 million in cash on completion to Alchemy Partners and the other Cathedral shareholders, funded through a combination of internally available cash resources and the net proceeds of the placing of up to 16,843,382 new common shares in the Company, representing approximately 9.99% of the Company’s existing issued share capital, with institutional investors.

The Company said,”The Board believes that Lancashire’s and Cathedral’s existing businesses are a strong complementary fit and expects the Acquisition to bring material benefits to the enlarged Lancashire Group following the Acquisition. The transaction represents a rare opportunity to acquire a high-quality Lloyd’s business with a short-tail focus, strong business model fit and robust underwriting performance. The Enlarged Group will have access to an enhanced insurance and reinsurance platform and will benefit from direct participation in Lloyd’s, the world’s leading specialist insurance market. The Acquisition further provides Lancashire with flexibility to respond to the changing industry and market environment which increasingly requires multiple distribution capability.

A.M. Best Co. has commented that the ratings of Lancashire remain unchanged following its announcement that it has entered into conditional agreements to acquire the entire issued and to be issued share capital of Cathedral Capital Limited.

A spokesperson from the ratings agency said, “The acquisition will enhance Lancashire’s insurance and reinsurance platform, which will now benefit from its participation at Lloyd’s. Additionally, the transaction will provide Lancashire increased flexibility to respond to the changing industry and market environments. Given Lancashire’s excellent consolidated risk-adjusted capitalization, historically strong operating results since inception, experienced management team, comprehensive risk management program and modest financial leverage, the proposed acquisition is not anticipated to adversely impact the financial position of Lancashire. The transaction is anticipated to close in the fourth quarter of 2013, subject to regulatory approvals and other customary closing conditions.

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