Reinsurer Validus Holdings, Ltd. (VR) said Thursday that it has agreed to buy Flagstone Reinsurance Holdings, S.A. (FSR) for $623.2 million in cash and stock to strengthen its property catastrophe reinsurance and short-tail specialty reinsurance platform.
Flagstone shareholders will receive 0.1935 of a Validus voting share and $2 in cash for each Flagstone share. The deal provides Flagstone shareholders with a 19.4% premium and $8.43 of value per share based on the closing share price for each of Validus and Flagstone as of Wednesday.
Investment funds associated with Lightyear Capital and Trilantic Capital Partners, which collectively own about 22.5% of the outstanding Flagstone shares, have agreed to vote in favor of the deal.
The deal is expected to close in the fourth quarter of 2012.
The combined company will maintain Validus' name, headquarters and executive management.
Ed Noonan, Validus' Chairman and Chief Executive Officer, said, "This is a compelling transaction for us that allows Validus to further build upon our market leading position in catastrophe risk. Flagstone brings a strong client base that will add scale to our business."
"The transaction, which our Board of Directors has unanimously concluded is in the best interest of Flagstone, concludes a lengthy and extensive process in which the Board carefully considered a broad range of strategic alternatives," said David Brown, Flagstone's Chief Executive Officer. Last year, Validus unsuccessfully tried to buy another reinsurer Transatlantic Holdings Inc., a former unit of American International Group Inc. (AIG). Transatlantic's board finally accepted a $3.4 billion stock-and-cash offer from property and casualty insurer Alleghany Corp in November.
Validus shares are currently trading at $33.42, up 18 cents, while Flagstone Re shares are currently trading at $8.47, up $1.41 or 19.47%.
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