Watford Holdings Ltd. Board of Directors Determines Proposal from Enstar Group Limited Could Reasonably be Expected to Result...
October 19 2020 - 05:10PM
Watford Holdings Ltd. (NASDAQ: WTRE) (“Watford” or the “Company”)
today announced its Board of Directors has determined, in its good
faith judgment (after consultation with the Company’s financial
advisors and outside legal counsel), that the unsolicited,
non-binding proposal from Enstar Group Limited (NASDAQ: ESGR)
(“Enstar”) to acquire the Company's common shares for $34.50 per
share, subject to confirmatory diligence, could reasonably be
expected to lead to a “Superior Proposal” as defined in the
Company's merger agreement with Arch Capital Group Ltd. (“Arch”)
and that the failure to take such action would be inconsistent with
the directors’ exercise of their fiduciary duties under applicable
law.
Under the merger agreement with Arch, the determination by the
Company's Board allows the Company, subject to Enstar entering into
an Acceptable Confidentiality Agreement (as defined in the merger
agreement with Arch) with the Company, to provide information to
and conduct discussions and negotiations with Enstar. The Company’s
Board has not determined that Enstar’s proposal in fact constitutes
a Superior Proposal under the current provisions of the merger
agreement with Arch and has not changed its recommendation in
support of the merger with Arch.
There can be no assurance that the discussions with Enstar will
result in the Company's Board’s determination that the Enstar
proposal is a Superior Proposal or the consummation of a
transaction that is superior to the pending transaction with Arch
or that the terms of any new transaction will be the same as those
reflected in Enstar's proposal.
As announced on October 9, 2020, the Company entered into a
definitive merger agreement with Arch and Greysbridge Ltd., a
wholly owned subsidiary of Arch (“Merger Sub”), pursuant to which,
among other things and subject to certain conditions, (a) each
issued and outstanding common share of the Company (other than (i)
shares to be canceled pursuant to the merger agreement with Arch
and (ii) restricted share units to be canceled and exchanged
pursuant to the merger agreement with Arch), would be converted
into the right to receive $31.10 in cash, without interest, (b)
each issued and outstanding 8½% Cumulative Redeemable Preference
Share of the Company (the “Preference Shares”) would remain
outstanding as a preference share of the surviving company and
would be entitled to the same dividend and other relative rights,
preferences, limitations and restrictions as are now provided to
the Preference Shares and (c) Merger Sub would merge with and into
the Company, with the Company surviving as a wholly owned
subsidiary of Arch.
Advisors
Morgan Stanley is acting as financial advisor to Watford, and
Clifford Chance US LLP is serving as Watford’s legal advisor.
Contact
Watford HoldingsLaurence B.
RichardsonLBR@WatfordHoldings.com
About Watford Holdings
Ltd.
Watford Holdings Ltd. is a global property and casualty
insurance and reinsurance company with approximately $1.0 billion
in capital as of June 30, 2020, comprised of $172.6 million of
senior notes, $52.4 million of contingently redeemable preference
shares and $776.2 million of common shareholders’ equity, and with
operations in Bermuda, the United States and Europe. Its operating
subsidiaries have been assigned financial strength ratings of “A-”
(Excellent) from A.M. Best and “A” from Kroll Bond Rating Agency.
On May 1, 2020, A.M. Best announced that it had placed under review
with negative implications the financial strength ratings of
Watford's operating subsidiaries. On May 7, 2020, Kroll Bond Rating
Agency affirmed the “A” insurance financial strength ratings of
Watford's operating subsidiaries as well as the “BBB+” credit
rating of Watford Holdings Ltd., with the outlook for all ratings
revised to negative.
Cautionary Note Regarding
Forward-looking Statements
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward−looking statements. This release or any
other written or oral statements made by or on behalf of Watford
and its subsidiaries may include forward−looking statements, which
reflect Watford's current views with respect to future events and
financial performance. All statements other than statements of
historical fact included in or incorporated by reference in this
release are forward−looking statements, including statements
regarding the pending merger with Arch and the unsolicited,
non-binding proposal from Enstar; the expected benefits of the
proposed transactions; and any assumptions underlying any of the
foregoing. Forward−looking statements can generally be identified
by the use of forward−looking terminology such as "may," "will,"
"expect," "intend," "estimate," "anticipate," "believe" or
"continue" or their negative or variations or similar terminology.
Forward−looking statements involve Watford's current assessment of
risks and uncertainties. Actual events and results may differ
materially from those expressed or implied in these statements. A
non-exclusive list of the important factors that could cause actual
results to differ materially from those in such forward-looking
statements includes the following: uncertainties regarding any
determinations made by Watford’s Board of Directors following its
evaluation of the Enstar proposal, the actions of Arch in response
to any Watford discussions with Enstar, the results of Watford's
discussions with Enstar, and the impact of actions of other parties
with respect to any discussions with Enstar and the potential
consummation of the pending merger with Arch; Enstar's proposal is
non-binding and may change; legal proceedings may be initiated
against Watford or its directors related to the discussions with
Enstar or the merger agreement with Arch; the business of Watford
may suffer as a result of uncertainty surrounding the proposed
transactions and there may be challenges with employee retention as
a result of the proposed transactions; the proposed transactions
may involve unexpected costs, liabilities or delays; adverse
general economic and market conditions; increased competition;
pricing and policy term trends; fluctuations in the actions of
rating agencies and Watford's ability to maintain and improve its
ratings; investment performance; the loss of key personnel; the
adequacy of Watford's loss reserves, severity and/or frequency of
losses, greater than expected loss ratios and adverse development
on claim and/or claim expense liabilities; greater frequency or
severity of unpredictable natural and man-made catastrophic events,
including pandemics such as COVID-19; the impact of acts of
terrorism and acts of war; changes in regulations and/or tax laws
in the United States or elsewhere; Watford's ability to
successfully integrate, establish and maintain operating procedures
as well as integrate the businesses Watford has acquired or may
acquire into its existing operations; changes in accounting
principles or policies; material differences between actual and
expected assessments for guaranty funds and mandatory pooling
arrangements; availability and cost to Watford of reinsurance to
manage the Watford's gross and net exposures; the failure of others
to meet their obligations to Watford; changes in the method for
determining the London Inter-bank Offered Rate (“LIBOR”) and the
potential replacement of LIBOR and other factors identified in
Watford's filings with the U.S. Securities and Exchange Commission
(“SEC”).
The foregoing review of important factors should not be
construed as exhaustive and should be read in conjunction with
other cautionary statements that are included herein or elsewhere.
All subsequent written and oral forward−looking statements
attributable to us or persons acting on our behalf are expressly
qualified in their entirety by these cautionary statements. Watford
does not undertake any obligation to publicly update or revise any
forward−looking statement, whether as a result of new information,
future events or otherwise.
Additional Information and Where to Find
It
In connection with the proposed merger with Arch, Watford
intends to file relevant materials with the SEC, including a
preliminary proxy statement on Schedule 14A, and Watford and
certain other persons, including Arch, intend to file a
Schedule 13E-3 transaction statement with the SEC.
Following the filing of the definitive proxy statement with the
SEC, Watford will mail the definitive proxy statement and a proxy
card to each shareholder entitled to vote at the special meeting
relating to the proposed merger with Arch. INVESTORS ARE URGED TO
READ THE PROXY STATEMENT AND THE SCHEDULE 13E-3 WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
Investors may obtain the proxy statement, as well as other filings
containing information about Watford, free of charge, from the
SEC’s web site (www.sec.gov). Investors may also obtain Watford’s
SEC filings in connection with the transaction, free of charge, by
directing a request to Watford Holdings Ltd., Waterloo House, 1st
Floor, 100 Pitts Bay Road, Pembroke HM 08, Bermuda.
Participants in the
Solicitation
Watford and its directors, executive officers and employees and
certain other persons may be deemed to be participants in the
solicitation of proxies in respect of the transaction. Information
regarding Watford’s directors and executive officers is available
in its definitive proxy statement for its 2020 annual meeting of
shareholders filed with the SEC on April 14, 2020. This
document can be obtained free of charge from the sources indicated
above. Other information regarding the interests of the
participants in the proxy solicitation will be included in the
proxy statement relating to the transaction when it becomes
available. This document does not constitute a solicitation of a
proxy, an offer to purchase or a solicitation of an offer to sell
any securities.
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