Specialty insurer Markel Corp. (MKL) has agreed to acquire Alterra Capital Holdings Ltd. (ALTE) for about $3.13 billion in stock and cash, the two companies said Wednesday.
Markel noted that the addition of Alterra's reinsurance and large account insurance portfolios will enable it to diversify and strengthen its own specialty insurance business. Shares of Alterra are gaining more than 23 percent in the regular trading session following the news.
Under the deal, Glen Allen, Virginia-based Markel will offer $31 per share in stock and cash to acquire Bermuda-based Alterra. The offer price represents a 34 percent premium to Alterra's closing stock price of $23.15 per share on Tuesday.
Upon closing of the transaction, each Alterra common share will be converted into the right to receive 0.04315 Markel common shares and additional $10 in cash.
Markel's shareholders will own about 69 percent of the combined company, while Alterra's shareholders will own the remaining 31 percent stake. The boards of directors of both companies have unanimously approved the merger.
The transaction, subject to customary closing conditions including shareholder and regulatory approvals, is expected to close in the first half of 2013. Upon closing, two directors designated by Alterra's current board will be added to Markel's board of directors.
Marston Becker, president and chief executive officer of Alterra, is expected to leave the company following the close of the transaction.
Steven Markel, vice chairman of Markel, said, "We are very pleased to have reached this agreement to acquire Alterra, an impressive company with proven worldwide underwriting operations in product lines that we believe are highly complementary to Markel's existing lines."
Markel added, "In particular, the addition of Alterra's reinsurance and large account insurance portfolios will serve to diversify and strengthen Markel's current book of specialty insurance business."
Following the close of the transaction, Markel expects to write annual gross premiums of about $4.4 billion and to have about $6 billion in equity with capital flexibility to support future growth. The combined entity's investment portfolio will total more than $16 billion.
In early November, Markel reported a decline in profit for the recent third quarter to $49.65 million or $5.32 per share from $53.26 million or $5.48 per share in the prior-year period. Total operating revenues increased to $765.78 million from $676.09 million in the year-ago period.
Alterra too reported a decline in profit for the third quarter, to $37.7 million or $0.38 per share from $48.4 million or $0.46 per share in the year-ago period. Revenues rose to $407.6 million from $400.0 million in the same period last year.
In Wednesday's regular session, MKL is trading at $450.70, down $35.35 or 7.27 percent on a volume of 1,800 shares.
ALTE is trading at $28.59, up $5.44 or 23.52 percent on a volume of 1.18 million shares.
by RTT Staff Writer
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