Third Point Re and Sirius Group to merge in $788m deal
Bermuda-based specialty reinsurer Third Point Re and multi-line re/insurer Sirius Group have entered into a definitive agreement to merge in a "transformational" cash and stock transaction valuing at approximately $788 million.
The merger will create a global company with approximately $3.3 billion of tangible capital, to be renamed SiriusPoint.
The new company will be led by Sid Sankaran as chairman and CEO. Kip Oberting, Sirius Group's president and CEO, will be stepping down from his role upon closing of the transaction.
According to the companies, the deal aims to create a diversified company with an "attractive business profile and a strong balance sheet". SiriusPoint will be "ideally positioned" to capitalise on a range of expansion opportunities in the insurance and reinsurance market.
Based on the closing price of Third Point Re stock on August 5, 2020, the transaction is valued at approximately $788 million. In addition, Third Point Re shareholders will be protected from up to $100 million of net incremental COVID-19 related losses at Sirius Group incurred in certain circumstances for three years following the closing.
Moreover, China Minsheng Investment Group has also agreed to a 9.9 percent voting cap and standstill limitations that will eliminate any historical SiriusPoint stakeholder concerns relating to Sirius Group's governance and access to capital markets.
Third Point Re will finance the transaction through a combination of cash-on-hand; equity issued to Sirius Group shareholders; equity issued to Daniel Loeb, CEO and chief investment officer of Third Point, and currently its largest individual shareholder, pursuant to an agreement to purchase approximately $50 million worth of SiriusPoint shares at closing; and if necessary, other debt or equity financing.
Third Point said the transaction is expected to be accretive to earnings per share and return on equity in year one following the close.
Sankaran has been a member of Third Point Re's Board since August 2019, is currently the chief financial officer of Oscar Health, and previously served as chief financial officer and chief risk officer of AIG. Third Point Re's current CEO, Dan Malloy, will remain a senior underwriting executive of SiriusPoint following the closing.
Sankaran said: "We are excited to create a powerful new entity that focuses on underwriting first but strives for excellence in its investment results. This transaction further strengthens our reinsurance operations and positions us to enter lines of business with higher risk-adjusted returns to achieve underwriting profitability.
"Combining with Sirius Group accelerates our continuing objective to deliver consistently strong book value per share growth over the long-term. Our new scale and global platform, diverse franchise, and enhanced financial profile will enable us to provide tremendous value to clients, brokers, and shareholders. I look forward to working with Sirius Group's terrific and dedicated team."
Under the new strategic investment portfolio partnership, SiriusPoint will have access to a range of products managed by Third Point, including its flagship fund strategy, as well as new and existing fixed-income products. Third Point will also help oversee SiriusPoint's investment portfolio allocation and a diversified range of third-party traditional asset managers.
The SiriusPoint board of directors will comprise the current Third Point Re board at the time of closing, with the addition of two new board members - Rachelle Keller from Sirius Group and Peter W. H. Tan from CM Bermuda, Sirius Group's current majority shareholder, and an affiliate of CMIG International Holding Pte.
In addition, Third Point Re's former lead independent director, Steven Fass, will join the company as vice chairman. Fass is also a former CEO of Sirius Group. He will work closely with Sankaran and senior members of the Sirius Group team in the integration of the businesses.
Third Point founder Daniel Loeb said: "This transaction fulfills our vision to move Third Point Re up the quality curve by adding diversified insurance lines to our existing business, thus improving returns on capital and reducing insurance volatility, expanding our investment strategy from a single manager model to reduce investment volatility, and creating critical mass to support both internal growth and future acquisitions. I am confident that this transaction will benefit both customers and shareholders of Third Point Re and Sirius."
Meyer Frucher, non-executive chairman of the board of Sirius Group, said: "This strategic business combination is the result of a lot of hard work and the collaborative efforts of the Sirius Group Board, management team and CMIH and is a win-win for both Sirius Group and Third Point Re. I would especially like to acknowledge and thank Kip Oberting and Gene Boxer for their dedication and tireless efforts to ensure the successful resolution and conclusion of the firm's strategic review process."
Tan, chairman of CMIG, said: "We think this is a terrific outcome that leaves a better, stronger competitor in the market. We are proud to continue as investors."
