Markel to Acquire Alterra for Approximately $31 Per Share in Stock and Cash
Markel Corporation (NYSE: MKL) and Alterra Capital Holdings Limited (“Alterra”) (NASDAQ: ALTE; BSX: ALTE.BH) announced today that their respective boards of directors have each unanimously approved a definitive merger agreement. Under the terms of the agreement, the aggregate consideration for Alterra is approximately $3.13 billion, based on a closing price of $486.05 for Markel common stock on December 18, 2012.
At closing, each Alterra common share will be converted into the right to receive 0.04315 Markel common shares (with cash paid for fractional shares) plus a cash payment of $10. Following the merger, Markel's existing shareholders will own approximately 69% of the combined company on a fully diluted basis, with Alterra's shareholders owning approximately 31%. Completion of the transaction is contingent upon customary closing conditions, including shareholder and regulatory approvals, and it is expected to close in the first half of 2013.
Upon closing, two directors designated by Alterra's current board will be added to the board of directors of Markel.
Steven A. Markel, Vice Chairman of Markel, commented: “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. 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. We look forward to welcoming Alterra's talented underwriting teams to Markel – with their help and the benefit of approximately $6 billion in combined shareholders' equity, we believe we will be well positioned to take advantage of a wide range of profitable opportunities.”
W. Marston (Marty) Becker, President and Chief Executive Officer of Alterra, who is expected to leave the company following the close of the transaction, said: “The combination of Alterra with Markel will create an incredibly strong company in global specialty insurance and investments. The demonstrated track record of underwriting discipline in niche market segments by both companies, along with Markel's proven asset management strengths, should benefit all stakeholders. I am confident that Alterra's shareholders, clients and other business partners will continue to be well served when Alterra's underwriting operations join forces with Markel's, and all should benefit from the superior financial strength, expanded capabilities and synergies created by the combined entity.”
Strategic and financial attributes associated with the combination of Markel and Alterra:
The combination of Markel and Alterra is expected to create significant benefits for the shareholders of both companies, and to provide a robust foundation for strong financial performance going forward.
Enhanced size and scale: Following the close of the transaction, Markel is expected to write annual gross premiums of approximately $4.4 billion and to have approximately $6 billion in equity with capital flexibility to support future growth.
Strong and well diversified franchise: Complementary business profiles provide important diversification of risk, with Markel adding reinsurance and large-account insurance to its specialty insurance portfolio. Following the close of the transaction, Markel's business is expected to be approximately 50% short-tail, 50% long tail; 67% insurance and 33% reinsurance.
Common cultures of underwriting discipline: The merger brings together seasoned and accomplished underwriting teams with limited overlap in diverse specialty insurance and reinsurance lines.
Strong investment performance: Markel brings a long and successful track record of investment outperformance. This expertise can now be applied to the combined entity's investment portfolio of over $16 billion.
Additional details on the transaction are posted on the websites of Markel and Alterra, at www.markelcorp.com and www.alterracap.com, respectively.
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