Endurance On Aspen’s “Vehement Refusal”
Endurance Specialty Holdings Ltd. today [Apr 21] said that the “vehement refusal” of Aspen Insurance Holdings Ltd. to consider its $3.2 billion proposal “continues to deny its shareholders the ability to receive a highly attractive premium and an ongoing stake in a global industry leader.”
The two Bermuda-based re/insurers have been going back and forth since Aspen unanimously rejected Endurance’s proposal earlier this month.
In a letter to shareholders yesterday, Aspen said they have “repeatedly informed Endurance of our serious concerns regarding its proposal, but Endurance has failed to respond substantively to any of them.”
Aspen said that Endurance stock as consideration in a combination is “not appealing,” as Endurance has an “unattractive business mix and quality of earnings issues.”
In a statement issued today, Michael J. McGuire, Chief Financial Officer of Endurance, said: “Having already rejected our proposal, Aspen’s defensive statement simply repeats inaccurate characterizations and ignores the plain fact that we are offering its shareholders significant value for their shares and the opportunity to participate in a larger, superior organization going forward. This is another clear sign of an entrenched Board and management that is not aligned with shareholder interests.
“Endurance remains clearly intent on consummating a transaction and not, as Aspen claims, just ‘kicking the tires.’ Aspen well knows that customary due diligence is no roadblock and would not present any impediment to closing a negotiated transaction.
“Moreover, the broad range of Aspen and Endurance shareholders with whom we have been speaking agree with the strategic rationale and financial benefits we outlined. This stands in stark contradiction to Aspen’s mischaracterization of market sentiment, which we strongly question,” Mr. McGuire added.
Endurance also noted the following:
Highly attractive premium for an underperforming company – Aspen’s “go it alone” strategy is cold comfort to investors looking at receiving a significant premium for their shares, given that Aspen has meaningfully underperformed Endurance and its peers since 2009 in combined ratio, return on equity, and growth in book value per share.
Endurance alignment with shareholders – Aspen simply cannot assert meaningful alignment of interests with shareholders given the paucity of the board and management’s ownership stake, both individually and collectively. This contrasts dramatically with Chairman and CEO John Charman’s substantial ownership stake in Endurance as well as his commitment to purchase $25 million of additional shares in connection with the transaction. In fact, insider ownership of Endurance totals 4.7 percent vs. 1.4 percent for Aspen, a sharp disparity.
Financing strength and commitment – In addition to the significant financial strength and liquidity of Endurance’s balance sheet, it has secured an equity commitment from industry-leading institutional investors to fund part of the cash consideration of the transaction. The equity commitment is a strong validation of Endurance and the strategic, operational, and financial merits of the proposed transaction.
Unparalleled Lloyd’s expertise and insight – Mr. John Charman has 30 years of experience in Lloyd’s, including as founder of the first Lloyd’s syndicate backed by corporate capital and as Senior Deputy Chairman at the Council of Lloyd’s during its financial crisis. Try as Aspen may to distort a year-old comment, the fact remains that he is and has always been a strong supporter of a well capitalized, larger Lloyd’s operation, which is what the combined Endurance-Aspen platform would be.
Cultural strength and compatibility — The significant inflow of world-class talent that Endurance has attracted in the past year from across the industry is a strong testament to the winning culture it has created. The combined company will have greater scale and market presence that will create expanded opportunities. In the face of that, assertions about cultural issues and dis-synergies impeding the operation of the combined company are unfounded.
Mr. McGuire concluded: “We remain fully committed to delivering our highly attractive premium to Aspen shareholders. To date, we have taken a deliberate approach, allowing Aspen ample opportunity at each step to engage with us for the benefit of their shareholders.
“We will continue to take the steps necessary to make sure Aspen shareholders have the opportunity to realize a significant premium for their shares, even in the face of the misguided resistance of Aspen’s board.”
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