Aspen again rejects Endurance as tensions escalate

Aspen Insurance has rejected a revised proposal by Endurance to acquire the business describing the new offer as grossly undervaluing the company and a strategic mismatch that would not be in the interests of its shareholders.

Endurance has increased its offer from $47.50 to $49.50 per share in cash and Endurance common shares. The new offer represents a 25.7 percent premium to Aspen’s unaffected closing share price of $39.37 on April 11, 2014 and a 19.5 percent premium to Aspen’s all-time high share price of $41.43 on December 31, 2013.

And once again, in what is becoming an increasingly bitter battle between the two companies, board members from each company have made derisive comments about the other and the merits of the deal.

In its renewed offer, John Charman, Endurance’s chairman and CEO, said he would not be deterred by an entrenched board at Aspen that refuses to engage in what represents a good offer for its shareholders.

Meanwhile, Glyn Jones, the chairman of the board of directors at Aspen, described Endurance’s revised proposal as a backwards step in its efforts to pursue what has always been an ill-conceived transaction. He added that the board maintains serious concerns over the merits of the match and accused Endurance of using “coercive legal tactics in a desperate attempt to continue to advance an unattractive proposal that neither our board nor our shareholders support”.

Jones said: “Given Aspen’s strong 4.4 percent book value growth in the first quarter, Endurance’s new proposal represents an even lower multiple of book value per share than its initial proposal, and the stock portion of the proposal lags even further behind given the decline in Endurance’s stock price since its initial proposal,” said Jones.

“Despite Endurance touting its headline price of $49.50 per share, based on the proposed exchange ratio, the 60 percent of the consideration that would consist of stock had a value of $47.57 per share on May 30.

“In addition to grossly undervaluing Aspen, the proposal represents a strategic mismatch and, based on our conversations with major clients and brokers, would result in significantly greater dis-synergies than Endurance claims. Moreover, the revised proposal does nothing to address additional serious concerns we raised with respect to Endurance’s prior proposal, including a stock consideration that is highly unappealing and financing terms that remain unclear and lack certainty.”

Jones’ view on the offer is at odds with Charman’s, who stated: “This proposal significantly increases the already highly attractive premium provided by our initial proposal and provides increased certainty to Aspen’s shareholders. It also includes a meaningful cash component for an offshore insurance industry transaction, and provides Aspen shareholders the opportunity to participate in future value created by a stronger and more profitable company.”

Endurance said its new proposal was actually made privately to the Aspen board on May 7, 2014. This was rejected, however, and the Aspen board conveyed that it was not interested in negotiating, Endurance said.

Charman added: “We will not be deterred by an entrenched board and management that refuse to engage productively on the merits of our compelling proposal. The actions we have announced today provide a path for our respective shareholders to realise the substantial benefits of the combination of Endurance and Aspen. We will continue to pursue and execute upon these and other available means to reach a successful outcome.”

Meanwhile, Jones stated that he is confident Aspen can achieve more value for its shareholders without the risks that are inherent in a merger with Endurance.

“As demonstrated by our strong first quarter results, we are delivering on that plan. Aspen generated strong results across all parts of our business in the first quarter, with a resulting annualised operating ROE of 14.8 percent. We are well positioned to achieve our 10 percent operating ROE objective in 2014 and to deliver on our expectation that 2015 operating ROE will increase in the order of 100 basis points from 2014,” he said.