Two Lloyd’s insurers, Beazley plc, which is domiciled in Ireland and Hardy Underwriting, which is domiciled in Bermuda are engaged in a takeover tussle. Beazley, which also has extensive non-Lloyd’s operations, especially in the U.S., submitted a revised offer of 330 pence [£3.30 = app. $5.30] a share for a full takeover of Hardy after its earlier offer of 300 pence [£3.00 = app. $4.82] was rejected.
However, Hardy’s Board of Directors promptly rejected the revised offer. It stated that “the indicative revised conditional proposal substantially undervalues the Company and accordingly has communicated its rejection to Beazley.”
The Board’s statement cited the company’s history of “profitable growth,” a diversified “mix of short tail lines of business,” as well as its “talented underwriting teams, “prudent reserving policy; and successful strategy for controlled growth,” as the main reasons for rejecting the offer.
In addition hardy’s Board released a statement indicating that it “views the indicative revised conditional proposal as an attempt to acquire the Company opportunistically, taking advantage of both the current market environment and recent, short-term circumstances specific to Hardy.
“There can be no certainty that an offer will ultimately be made by Beazley for Hardy or the terms on which any such offer may be made, even if the preconditions are satisfied or waived.”
Beazley confirmed that it had made the offer, which it said would be funded from its “existing internal resources,” and indicated that it was also “conditional upon Hardy being willing to enter into discussions with Beazley with a view to commencing due diligence.”
Beazley’s statement further confirmed Hardy’s refusal of the offer, and noted that it “would not even be prepared to meet with Beazley to discuss it.”
However, Beazley added that it “believes that the Revised Proposal would have fully valued Hardy. It cited the fact that its offer represents a “50 percent premium to the closing Hardy share price on 5 October 2010, being the last day prior to the submission to the board of Hardy of Beazley’s initial proposal of 300 pence per Hardy share.”
Beazley added that the revised offer also represented a “47 per cent. premium to the volume-weighted average Hardy share price over the three months prior to the submission of the Initial Proposal; and a multiple of 1.36 times Hardy’s 30 June 2010 net tangible assets per share (on a fully diluted and ex-dividend basis), a premium valuation compared with both current trading valuations and other recent transactions in the Lloyd’s market.”
Beazley concluded that it “remains disappointed by the board of Hardy’s continued refusal to enter into a dialogue with Beazley regarding its Revised Proposal or to provide access to due diligence information it requires to progress it. Beazley believes that the board’s resistance is not in the interests of Hardy’s shareholders, and urges shareholders to encourage the board of Hardy to adopt a more constructive approach. In the absence of any such encouragement, Beazley will withdraw its Revised Proposal.”
Sources: Beazley plc and Hardy Underwriting
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