Aspen Insurance Holdings Limited (“Aspen”) AHL announced today that its
Board of Directors, after careful evaluation with the assistance of its
financial and legal advisors, unanimously determined to reject an unsolicited
proposal from Endurance Specialty Holdings Ltd. (“Endurance”) ENH to
acquire Aspen for $47.50 per share, 60% in Endurance common stock and 40% in
cash.
Glyn Jones, Chairman of the Board of Directors, said: “After careful review
and deliberation, the Board of Directors unanimously determined that
Endurance's proposal is not in the best interests of Aspen or its
shareholders. Endurance's ill-conceived proposal undervalues our company,
represents a strategic mismatch, carries significant execution risk, and would
result in substantial dis-synergies. Furthermore, most of the consideration to
Aspen shareholders would be in a stock that would reflect these problems.
“Aspen has a proven track record of performance and a clear strategy to
increase shareholder value. Endurance has a mixed operating track record, new
leadership, an unproven strategy, and no experience with large acquisitions.
Moreover, this transaction would be highly disruptive to Aspen's corporate
culture, which has proven to be a significant competitive advantage in the
marketplace.”
In making its determination, the Aspen Board of Directors considered, among
other factors, the following:
* Aspen is executing a clear strategy to deliver superior value for
shareholders, while Endurance's proposal undervalues the company and
carries significant risks.
* A combination would burden Aspen with Endurance's unproven underwriting
teams with no clear strategy; an unprofitable insurance business^1; and a
volatile and challenged crop business.
* Endurance has shown a public disdain for Lloyd's, which is the growth
engine of Aspen's well-established international insurance business.
* Endurance has a mixed operating track record, no experience with large
acquisitions, new leadership and an unproven strategy.
* The proposed transaction jeopardizes Aspen's corporate culture, which the
Company believes is a significant component of its franchise value because
it differentiates Aspen with clients and allows Aspen to recruit and
retain outstanding professionals.
* The disruption of market and underwriting relationships likely would
result in material loss of business.
* The proposal involves a number of substantial execution risks, including
financing uncertainty, due diligence outcome, regulatory approvals, the
need for favorable votes by the shareholders of both companies, and
integration risk.
Goldman, Sachs & Co. is acting as financial advisor and Wachtell, Lipton,
Rosen & Katz and Willkie Farr & Gallagher LLP are acting as legal advisors to
Aspen.
Below is a letter that Aspen previously sent to Endurance's Board of Directors
rejecting the same proposal that Endurance made public today:
8 April 2014
Board of Directors
c/o John R. Charman, Chairman and Chief Executive Officer
Endurance Specialty Holdings Ltd.
Wellesley House
90 Pitts Bay Road
Pembroke HM 08
Bermuda
Dear Members of the Board:
The Board of Directors of Aspen Insurance Holdings Limited has received your
letter of 3 April 2014.
Your most recent letter does not add to the information the Aspen Board had
when we thoroughly considered your 18 February 2014 letter and unanimously
concluded that the possible acquisition of Aspen by Endurance was not in the
best interests of Aspen or its stockholders and that we did not wish to pursue
the matter further. The Aspen Board continues to have no interest in pursuing
the matter further.
As was the case with your prior letters, we find your most recent letter to be
based on uninformed and unsubstantiated assertions and assumptions about
alleged benefits of the combination that do not stand up to analysis. The
Aspen Board has concluded that Aspen will be able to create superior value for
our stockholders based on our standalone plan. Aspen has a long history of
value creation for its stockholders and has a clearly articulated growth
strategy for delivering value to its stockholders going forward. We have built
a diversified business with a strong balance sheet, proven management team and
disciplined risk management, and are confident that continued execution of our
strategy provides value far in excess of what you have suggested in the
letter. The levers that we have available to achieve our ROE goals are clear
and well-understood by the market and you have clearly misrepresented our 10%
ROE guidance for 2014 as our long-term goal. We are confident we will be able
to deliver superior growth by following our plan.
As part of our review, we have evaluated Endurance's business mix, market
presence, quality of earnings, earnings outlook and management culture, all of
which we found to be either unattractive or incompatible with Aspen's
strategy. With respect to business mix, Endurance is over-concentrated in crop
insurance, a business which is troubled, low margin, recently volatile and
exposed to major risks. The other insurance businesses are nascent and have
not demonstrated progress. Endurance's continued well-publicized antipathy for
Lloyd's is inconsistent with Aspen's business model, as our Lloyd's syndicate
is one of the most dynamic parts of our insurance franchise and a top quartile
performer amongst Lloyd's syndicates. Aspen has a strong and well-regarded
reinsurance business with a clearly defined strategy for addressing the
changes in market dynamics while, in contrast, Endurance is hesitant and
uncertain about the industry. Furthermore, as analysts have pointed out,
Endurance's earnings in recent years have been disproportionately driven by
reserve releases (a trend that accelerated at year-end 2013) and the path for
future earnings is unclear.
Any combination with Endurance's centralized, top-down management model, as
compared to our collaborative, teamwork-oriented culture, would result in
extreme personnel disruption and loss of attractive business. It is worth
noting that our company is in significant litigation due to your orchestrated
poaching of Aspen employees and clear breaches of fiduciary and other duties
arising from this. The dis-synergies from the transaction you propose,
including loss of business and personnel, combined with Endurance's
unappealing business mix, earnings track record and incompatible culture, make
the combination unattractive, particularly in contrast to what Aspen expects
to achieve by following our standalone plan.
In addition, your letter poses significant risks and uncertainties, including
(1) Endurance's due diligence of Aspen, (2) due diligence of Aspen by your
financing sources, (3) your ability to raise the necessary funds, even the
most general terms and amounts of which are omitted from your letter (we note
in this regard that one of the financing sources from your prior letter is no
longer included, and CVC's commitment is no longer described as “equity”), (4)
your ability to secure all required regulatory approvals and (5) importantly,
approval of your own stockholders.
The foundation of Aspen's business is our client relationship franchise, and
our people are our most valuable assets. The uncertainty and distraction that
would result from pursuing what your letter proposes would be destructive of
value for our company and our stockholders. Your “proposal” is merely the
request for a one-way option to start an investigation of our company and
later decide if you wish to pursue a transaction. The Aspen Board is
vehemently opposed to the hostile attempt of Endurance to address its business
problems at the expense of Aspen and its stockholders and to your potential
effort to destabilise a key competitor.
For the reasons outlined above, we are not interested in pursuing what your
letter proposes and do not believe that any purpose would be served by meeting
with you or your advisors.
Yours sincerely,
/s/ /s/
Glyn Jones Chris O'Kane
Chairman of the Board of Directors Chief Executive Officer
cc: CVC Capital Partners Advisory
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