REG-XL Group plc Acquisition <Origin Href="QuoteRef">CGL.L</Origin> <Origin Href="QuoteRef">XL.N</Origin> - Part 1
28/01/2015 24:09
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LONDON--(Business Wire)--
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION.
THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS OR PROSPECTUS
EQUIVALENT DOCUMENT AND INVESTORS SHOULD NOT MAKE ANY DECISION IN RELATION TO
THE NEW XL SHARES OR THE ACQUISITION EXCEPT ON THE BASIS OF THE INFORMATION IN
THE IRISH PROSPECTUS AND THE CIRCULAR WHICH ARE PROPOSED TO BE PUBLISHED IN DUE
COURSE.
9 January 2015
RECOMMENDED ACQUISITION
of
Catlin Group Limited
by
XL Group plc
Summary
* XL Group plc ("XL") and Catlin Group Limited ("Catlin") are pleased to
announce that they have agreed the terms of a recommended cash and share
acquisition of the entire issued and to be issued share capital of Catlin by XL
(the "Acquisition"). It is intended that the Acquisition will be effected by
means of a two-step, integrated process comprising a scheme of arrangement under
Section 99 of the Bermuda Companies Act followed immediately by a merger under
Section 104H of the Bermuda Companies Act.
* The total value receivable by Catlin Shareholders comprises:
for each Catlin Share 388 pence in cash
and
0.130 New XL Share
(together, the "Acquisition Consideration")
plus
the expected 2014 Final Dividend payable by Catlin of 22 pence in cash to Catlin Shareholders on the relevant record date
* Based on the Closing Price of $35.42 per XL Share and the exchange rate of
$1.5084:£1 on 8 January 2015 (being the latest practicable date prior to the
date of this announcement), the Acquisition (together with the expected 2014
Final Dividend but excluding the ITB Special Dividend referred to below) values
each Catlin Share at approximately 715.3 pence and the entire issued and to be
issued share capital of Catlin at approximately £2.79 billion.
* In addition, XL and Catlin have agreed that, subject to completion of the
disposal of Catlin`s investment in Box Innovation Group Limited (trading as
"insurethebox") ("ITB") and receipt of the proceeds therefrom, the Catlin Board
may declare and pay a special dividend to Catlin Shareholders (the "ITB Special
Dividend"), out of the distributable surplus from the sale of ITB, of
approximately 12 pence per Catlin Share. The Catlin Board expects that the
disposal of ITB will complete during the first quarter of 2015 and, accordingly,
to declare and pay the ITB Special Dividend promptly thereafter.
* The expected 2014 Final Dividend (which is expected to be announced with
publication of Catlin`s preliminary results on or about 12 February 2015) and
the ITB Special Dividend would be receivable by Catlin Shareholders on the
register at the relevant record date, which will be announced when such
dividends are declared. The Acquisition Consideration would be receivable by
Catlin Shareholders on the register at the Scheme Record Time (shortly before
the Effective Date).
* The Acquisition Consideration, together with the expected 2014 Final Dividend
but excluding the ITB Special Dividend, represents a premium of approximately:
* 22.9 per cent. to the Closing Price per Catlin Share of 582 pence on 16
December 2014 (being the last Business Day prior to the date of the Possible
Offer Announcement);
* 26.3 per cent. to the volume weighted average Closing Price per Catlin Share
of 566 pence for the month ended on 16 December 2014 (being the last Business
Day prior to the date of the Possible Offer Announcement); and
* 33.0 per cent. to the volume weighted average Closing Price per Catlin Share
of 538 pence for the three months ended on 16 December 2014 (being the last
Business Day prior to the date of the Possible Offer Announcement).
* A Mix and Match Facility will be provided which will allow Catlin Shareholders
(other than certain Overseas Shareholders) to elect, subject to off-setting
elections being made by other Catlin Shareholders, to vary the proportions in
which they receive New XL Shares and cash.
* The Acquisition will be conditional on, among other things, the approval of
Catlin Shareholders at the Court Meeting and the General Meeting, receipt of
Clearances and the satisfaction (or waiver) of the other Conditions set out in
Appendix I to this announcement. It is currently expected that the Court Meeting
and General Meeting will be held in the second quarter of 2015, and the
Acquisition is expected to become effective in mid-2015, subject to receipt of
Clearances without delay and to the satisfaction (or waiver) of the other
Conditions.
* The Catlin Directors, who have been so advised by J.P. Morgan Cazenove and
Evercore, consider the terms of the Acquisition to be fair and reasonable. In
providing their advice, J.P. Morgan Cazenove and Evercore have taken into
account the commercial assessments of the Catlin Directors.
* Accordingly, the Catlin Directors intend to recommend unanimously that Catlin
Shareholders vote in favour of the resolutions to approve the Acquisition, which
are to be proposed at the Court Meeting and at the General Meeting. In addition,
the Catlin Directors have irrevocably undertaken to vote or procure votes in
favour of such resolutions (or, in the event that the Acquisition is implemented
by way of a Takeover Offer, to accept or procure acceptance of such offer) in
respect of their (and, if applicable, their spouse`s) holdings of Catlin Shares,
in aggregate, representing 7,894,061 outstanding Catlin Shares and constituting
approximately 2.18 per cent. of Catlin`s issued share capital as at 8 January
2015 (being the latest practicable date prior to the date of this announcement).
* Stephen Catlin, Chief Executive Officer of Catlin, intends to continue to hold
New XL Shares as a long-term investment following the Acquisition, reflecting
the parties` shared belief in the benefits of creating a combined company.
* The Circular, setting out the details of the Acquisition and the procedures to
be followed by Catlin Shareholders to vote at the Court Meeting and General
Meeting in order to approve the Acquisition, will be posted to Catlin
Shareholders simultaneously with or shortly after the publication by XL of the
Irish Prospectus in respect of the New XL Shares, which is expected to be in the
first quarter of 2015.
* XL`s legal name will remain XL Group plc following its acquisition of Catlin;
however, it will operate under the "XL Catlin" trade name. Following the
Acquisition, Mike McGavick will be Chief Executive Officer, Stephen Catlin will
be Executive Deputy Chairman, Peter Porrino will be Chief Financial Officer,
Greg Hendrick will serve as Chief Executive of Reinsurance, Paul Brand will
serve as Chair of the Insurance Leadership Team and Chief Underwriting Officer
Insurance and Kelly Lyles will serve as Deputy Chair, Insurance Leadership Team
and Chief Regional Officer, Insurance. The current members of XL Group plc`s
Board will remain as directors of XL Group plc following the Acquisition. In
addition, it is expected that Mr. Catlin, along with an additional Catlin
director who meets applicable independence qualifications and other criteria,
will join the XL Group plc Board following the Acquisition.
* XL Group plc, domiciled in Ireland and listed on the New York Stock Exchange
and the Bermuda Stock Exchange, is a global insurance and reinsurance business
providing property, casualty and specialty products to industrial, commercial
and professional firms, insurance companies and other enterprises on a worldwide
basis. As at 8 January 2015, being the latest practicable date prior to the date
of this announcement, XL had a market capitalisation of $9.2 billion. As of 30
September 2014, XL had total shareholders` equity of approximately $11.2 billion
and total assets of approximately $45.9 billion.
* Catlin Group Limited, domiciled in Bermuda and listed on the London Stock
Exchange, is an international specialist property/casualty insurer and reinsurer
that underwrites worldwide through six underwriting hubs. Based on the Closing
Price for a Catlin Share as at 8 January 2015, being the latest practicable date
prior to the date of this announcement, Catlin has a market capitalisation of
$3.9 billion (based on an assumed 390,000,000 Catlin Shares in issue as of the
Effective Date). As of 30 June 2014, Catlin`s total shareholders` equity
amounted to $4.0 billion (including $590 million of non-controlling interest in
preferred stock of consolidated subsidiaries), while total assets exceeded $16
billion.
* Commenting on the Acquisition, Mike McGavick, Chief Executive Officer of XL,
said:
"We are delighted to announce this compelling combination which positions us
strongly to provide more - and even better - answers for the world`s most
complex risks while enhancing our opportunities to create value for shareholders
and better serve clients and brokers. We believe the transaction will accelerate
each company`s strategy, and address the meaningful structural changes we see
shaping the P&C sector. Specifically, the combination will add immediate scale
in specialty insurance, it will create a more efficient and more capable global
network by bringing our two infrastructures together, and it creates a top 10
reinsurer with expanded alternative capital capabilities.
This is an extraordinary opportunity to bring together two innovators with roots
in disciplined underwriting, industry leadership and business vision, and strong
cultural alignment. I am especially pleased that Stephen Catlin will continue on
with the combined company and, on closing of the Acquisition, is expected to
serve on our Board. We will benefit enormously from Stephen`s input in all
strategic decisions and through our ability to leverage his vast market network
as we implement the strategy of the new combined company. With the combination
of our talented teams, we expect to maintain strong financial fundamentals while
generating attractive economics and long-term value for shareholders including
double-digit EPS and meaningful ROE accretion."
* John Barton, Chairman of Catlin, said:
"This transaction makes strong strategic and financial sense for Catlin
shareholders. The terms of the transaction represent an attractive premium
upfront, whilst also providing our shareholders the opportunity to participate
in further up-side by maintaining a shareholding in the combined entity."
* Stephen Catlin, Chief Executive Officer of Catlin, said:
"XL is a compelling partner for the Catlin business. Both businesses have been
built on underwriting excellence and benefit from strong cultural compatibility.
Together, the combined entity will be a market leading global specialty and
property catastrophe insurer which will be far better positioned to respond to
the changing dynamics that are impacting the broader insurance and reinsurance
markets.
We expect the enlarged business to benefit from increased diversification,
significant further economies of scale, strengthened franchises in each of its
markets and an improved standing with intermediaries. As a result, XL Catlin
will be better equipped to serve its clients across a range of distribution
channels and geographies with an enhanced suite of capabilities and products.
We believe that this transaction represents an excellent outcome for our
shareholders, clients and employees."
* This summary should be read in conjunction with, and is subject to, the full
text of the following announcement and its Appendices.
* The Acquisition will be subject to the Conditions and further terms that are
set out in Appendix I to the following announcement, and to the full terms and
conditions which will be set out in the Circular. Appendix II contains
information on the sources of information and bases of calculation used in this
summary and in the following announcement. Appendix III contains a summary of
the irrevocable undertakings referred to in this summary and in the following
announcement. Appendix IV contains the reports of Ernst & Young, Morgan Stanley
and Goldman Sachs International on the Quantified Financial Benefit Statements
contained in the following announcement. Appendix V contains definitions of
terms used in this summary and in the following announcement.
* A conference call to discuss the Acquisition will be held at 1:00 p.m. (London
time) on Friday, 9 January 2015. The conference call can be accessed through a
listen-only dial-in number or through a live webcast. To listen to the
conference call, please dial +1 (517) 308-9086 or +1 (888) 673-9805: Passcode:
"XL GLOBAL". For UK callers, please dial 44-20-7108-6248 or 0800-279-3953:
Passcode: "XL GLOBAL". The webcast will be available at www.xlgroup.com and will
be archived on XL`s website from approximately 3:30 p.m. (London time) on
Friday, 9 January 2015, through 5:00 a.m. (London time) on Monday, 9 February
2015. A telephone replay of the conference call will also be available beginning
at approximately 3:30 p.m. (London time) on Friday, 9 January 2015, until 5:00
a.m. (London time) on Monday, 9 February 2015, by dialling +1 (888) 568-0151 or
+1 (203) 369-3462.
Enquiries
XL
David Radulski (Investor Relations) Tel: +1 (203) 964 3470
Elliott Bundy (Communications) Tel: +1 (203) 674 6932
Morgan Stanley (financial adviser to XL)
Ian Hart Tel: +44 (0) 207 425 8000
Eric Bischof Tel: +1 (212) 761 4000
Gavin McFarland Tel: +1 (212) 761 4000
Goldman Sachs International (financial adviser to XL)
Andrea Vittorelli Tel: +1 (212) 902 1000
Nimesh Khiroya Tel: +44 (0) 207 774 1000
Jason Eisenstadt Tel: +1 (212) 902 1000
Sard Verbinnen & Co. (PR adviser to XL)
Drew Brown / Chris Kittredge (New York) Tel: +1 (212) 687 8080
Jonathan Doorley / Jennifer Stroud (London) Tel: +44 (0) 203 178 8914
Catlin
William Spurgin (Investor Relations) Tel: +44 (0) 207 458 5726
James Burcke (Media Relations) Tel: +44 (0) 207 458 5710
J.P. Morgan Cazenove (financial adviser and corporate broker to Catlin)
Conor Hillery Tel: +44 (0) 207 742 4000
Robert Thomson Tel: +44 (0) 207 742 4000
Mike Collar Tel: +44 (0) 207 742 4000
Evercore (financial adviser to Catlin)
Andrew Sibbald Tel: +44 (0) 207 653 6000
Stuart Britton Tel: +1 (212) 857 3100
Neil Bhadra Tel: +44 (0) 207 653 6000
Barclays(financial adviser and corporate broker to Catlin)
Jim Renwick Tel: +44 (0) 207 623 2323
Kunal Gandhi Tel: +44 (0) 207 623 2323
Michael Lamb Tel: +44 (0) 207 623 2323
Stuart Ord Tel: +44 (0) 207 623 2323
Maitland (PR adviser to Catlin)
Liz Morley Tel: +44 (0) 207 379 5151
Morgan Stanley, which is authorised by the Prudential Regulation Authority and
regulated by the Financial Conduct Authority and Prudential Regulation Authority
in the United Kingdom, is acting as joint financial adviser to XL and no one
else in connection with the Acquisition, and will not be responsible to anyone
other than XL for providing the protections afforded to clients of Morgan
Stanley nor for providing advice in relation to the Acquisition. Neither Morgan
Stanley nor any of its subsidiaries, branches or affiliates owes or accepts any
duty, liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any person who is
not a client of Morgan Stanley in connection with this announcement, any
statement contained herein or otherwise.
Goldman Sachs International, which is authorised by the Prudential Regulation
Authority and regulated by the Financial Conduct Authority and the Prudential
Regulation Authority in the United Kingdom, is acting as joint financial adviser
to XL and no one else in connection with the Acquisition and the other matters
referred to in this announcement. In connection with the Acquisition and any
other such matters, Goldman Sachs International, its affiliates and its and
their respective partners, directors, officers, employees and agents will not
regard any other person as their client, nor will they be responsible to anyone
other than XL for providing the protections afforded to their clients or for
giving advice in connection with the Acquisition or any other matter referred to
herein.
J.P. Morgan Cazenove, which is authorised and regulated by the Financial Conduct
Authority, is acting as joint financial adviser to Catlin and no one else in
connection with the Acquisition and will not be responsible to anyone other than
Catlin for providing the protections afforded to its clients or for providing
advice in connection with Acquisition, the contents of this announcement or any
matter referred to in this announcement.
Evercore, which is authorised and regulated by the Financial Conduct Authority,
is acting as joint financial adviser for Catlin and no one else in connection
with the matters referred to in this announcement and will not be responsible to
anyone other than Catlin for providing the protections afforded to its clients
or for providing advice in relation to the matters referred to in this
announcement.
Barclays, which is authorised by the Prudential Regulation Authority and
regulated by the Financial Conduct Authority and the Prudential Regulation
Authority, is acting exclusively for Catlin and no one else in connection with
the Acquisition and will not be responsible to anyone other than Catlin for
providing the protections afforded to its clients or for providing advice in
relation to the Acquisition or in relation to the contents of this announcement
or any transaction or any other matters referred to herein.
The City Code on Takeovers and Mergers
By virtue of its status as a Bermuda incorporated company, the Code does not
apply to Catlin.Catlin has incorporated certain takeover-related provisions into
its Bye-Laws but these do not provide Catlin Shareholders with the full
protections offered by the Code and enforcement of such provisions are the
responsibility of Catlin, not the Panel. Accordingly, Catlin Shareholders are
reminded that the Panel does not have responsibility, in relation to Catlin, for
ensuring compliance with the Code and is not able to answer shareholders`
queries.Catlin and XL have agreed certain matters regarding the application of
the Code to the Acquisition, and the terms of that agreement are summarised in
the following announcement.
In particular, public disclosures consistent with the provisions of Rule 8 of
the Code (as if it applied to Catlin) should not be e-mailed to the Panel, but,
as described below, released directly through a Regulatory Information Service.
Further Information
This announcement is for information purposes only and is not intended to and
does not constitute, or form any part of, an offer to sell or an invitation to
purchase or subscribe for any securities or the solicitation of any vote or
approval in any jurisdiction pursuant to the Acquisition or otherwise, nor shall
there be any sale, issuance or transfer of securities of XL or Catlin in any
jurisdiction in contravention of applicable law.The Acquisition will be made
solely pursuant to the terms of the Circular, which will contain the full terms
and conditions of the Acquisition, including details of how to vote in respect
of the Acquisition and accompanied by forms of proxy for use at the Court
Meeting and at the General Meeting. Any decision in respect of, or in response
to, the Acquisition should be made only on the basis of the information in the
Circular and the Irish Prospectus. Catlin Shareholders are advised to read the
Circular, the Irish Prospectus and any other formal documentation published in
relation to the Acquisition carefully, once it has been published or dispatched.
This announcement does not constitute a prospectus or a prospectus equivalent
document.
Whether or not Catlin Shares are voted at the Court Meeting or the General
Meeting, if the Acquisition becomes effective, all Catlin Shares will be
cancelled pursuant to the Acquisition.
This announcement has been prepared for the purpose of complying with Bermuda
and English law and the Listing Rules and the information disclosed may not be
the same as that which would have been disclosed if this announcement had been
prepared in accordance with the laws of jurisdictions outside the United Kingdom
and Bermuda.
Notice to U.S. Holders of Catlin Shares
The Acquisition relates to the shares of a Bermuda company and is being made by
means of a scheme of arrangement provided for under the Bermuda Companies Act.
The transaction, implemented by way of a scheme of arrangement is not subject to
the tender offer rules or the proxy solicitation rules under the U.S. Securities
Exchange Act of 1934, as amended. Accordingly, the Acquisition is subject to the
disclosure requirements and practices applicable to a scheme of arrangement
involving a target company in Bermuda listed on the London Stock Exchange and
applicable to the issuance of buyer shares under the laws of the Republic of
Ireland, which differ from the disclosure requirements of United States tender
offer and proxy solicitation rules. If, in the future, XL exercises its right to
implement the Acquisition by way of a Bermuda Merger or by way of a Takeover
Offer and determines to extend the Takeover Offer into the United States, the
Acquisition will be made in compliance with applicable United States laws and
regulations.
The New XL Shares to be issued pursuant to the Acquisition have not been
registered under the U.S. Securities Act, and may not be offered or sold in the
United States absent registration or an applicable exemption from the
registration requirements of the U.S. Securities Act.The New XL Shares to be
issued pursuant to the Acquisition will be issued pursuant to the exemption from
registration provided by Section 3(a)(10) under the U.S. Securities Act.If, in
the future, XL exercises its right to implement the Acquisition by way of a
Takeover Offer, a Bermuda Merger or otherwise in a manner that is not exempt
from the registration requirements of the U.S. Securities Act, it will file a
registration statement with the SEC that will contain a prospectus with respect
to the issuance of New XL Shares.In this event, Catlin Shareholders are urged to
read these documents and any other relevant documents filed with the SEC, as
well as any amendments or supplements to those documents, because they will
contain important information, and such documents will be available free of
charge at the SEC`s website at www.sec.gov or by directing a request to XL`s
contact for enquiries identified above.
Neither the SEC nor any U.S. state securities commission has approved or
disapproved of the New XL Shares to be issued in connection with the
Acquisition, or determined if this announcement is accurate or complete.Any
representation to the contrary is a criminal offence in the United States.
XL and Catlin are incorporated under the laws of Ireland and Bermuda,
respectively. In addition, some of their respective officers and directors
reside outside the United States, and all or much of their assets are or may be
located in jurisdictions outside of the United States. Therefore, investors may
have difficulty effecting service of process within the United States upon those
persons or recovering against XL, Catlin or their respective officers or
directors on judgments of United States courts, including judgments based upon
the civil liability provisions of the United States federal securities laws. It
may not be possible to sue XL or Catlin or their respective officers or
directors in a non-U.S. court for violations of the U.S. securities laws. There
is also doubt as to enforceability in Ireland and in Bermuda, in original
actions or in actions for enforcement, of the judgments of U.S. courts, based on
the civil liability provisions of U.S. federal securities laws. In particular,
there is no treaty between Ireland and the United States providing for the
reciprocal recognition and enforcement of foreign judgments, and there is no
treaty in force between the United States and Bermuda providing for the
reciprocal recognition and enforcement of judgments in civil and commercial
matters.
Notice to New Hampshire Residents
Neither the fact that a registration statement or an application for a license
has been filed under this chapter with the state of New Hampshire nor the fact
that a security is effectively registered or a person is licensed in the state
of New Hampshire constitutes a finding by the secretary of state that any
document filed under RSA 421-B is true, complete and not misleading. Neither any
such fact nor the fact that an exemption or exception is available for a
security or a transaction means that the secretary of state has passed in any
way upon the merits or qualifications of, or recommended or given approval to,
any person, security, or transaction. It is unlawful to make, or cause to be
made, to any prospective purchaser, customer, or client any representation
inconsistent with the provisions of this paragraph.
Overseas Shareholders
The laws of the relevant jurisdictions may affect the availability of the
Acquisition to persons who are not resident in the United Kingdom, the United
States, the Republic of Ireland or Bermuda.Persons who are not resident in the
United Kingdom, the United States, the Republic of Ireland or Bermuda or who are
subject to laws of any jurisdiction other than the United Kingdom, the United
States, the Republic of Ireland or Bermuda, should inform themselves about, and
observe, any applicable requirements.In particular, the ability of Catlin
Shareholders who are not resident in the United Kingdom, the United States, the
Republic of Ireland or Bermuda to vote their Catlin Shares with respect to the
Acquisition at the Court Meeting and the General Meeting may be affected by the
laws of the relevant jurisdiction in which they are located. Any person
(including, without limitation, nominees, trustees and custodians) who would, or
otherwise intends to, forward this announcement, the Circular or any
accompanying document to any jurisdiction outside the United Kingdom, the United
States, the Republic of Ireland or Bermuda should refrain from doing so and seek
appropriate professional advice before taking any action.
The Acquisition will not be made, directly or indirectly, in or into or by use
of the mails or any other means or instrumentality (including, without
limitation, telephonic or electronic) of interstate or foreign commerce of, or
any facility of a national, state or other securities exchange of, a Restricted
Jurisdiction. If the Acquisition is implemented by way of a Takeover Offer
(unless otherwise determined by XL and permitted by applicable law and
regulation), the offer may not be capable of acceptance by any such use, means,
instrumentality or facility or from within a Restricted
Jurisdiction.Accordingly, copies of this announcement and formal documentation
relating to the Acquisition are not being, and must not be, directly or
indirectly, mailed or otherwise forwarded or distributed in, into or from a
Restricted Jurisdiction and persons receiving this announcement (including
custodians, nominees and trustees) must not distribute or send it into or from a
jurisdiction where to do so would violate laws in that jurisdiction. Doing so
may render invalid any related purported acceptance of a Takeover Offer.If the
Acquisition is implemented by a Bermuda Merger or by way of a Takeover Offer and
XL extends the Takeover Offer into the U.S., it will do so in satisfaction of
the procedural and filing requirements of the U.S. securities laws at that time,
to the extent applicable thereto.
Forward-Looking Statements
This announcement contains forward-looking statements, both with respect to XL
and Catlin and their industries, that reflect their current views with respect
to future events and financial performance. Statements that are not historical
facts, including statements about XL`s or Catlin`s beliefs, plans or
expectations, are forward-looking statements. These statements are based on
current plans, estimates and expectations, all of which involve risk and
uncertainty. Statements that include the words "expect," "intend," "plan,"
"believe," "project," "anticipate," "may", "could" or "would" or similar
statements of a future or forward-looking nature identify forward-looking
statements. Actual results may differ materially from those included in such
forward-looking statements and therefore you should not place undue reliance on
them.
A non-exclusive list of the important factors that could cause actual results to
differ materially from those in such forward-looking statements includes: (a)
changes in the size of claims relating to natural or man-made catastrophe losses
due to the preliminary nature of some reports and estimates of loss and damage
to date; (b) trends in rates for property and casualty insurance and
reinsurance; (c) the timely and full recoverability of reinsurance placed by XL
or Catlin with third parties, or other amounts due to XL or Catlin; (d) changes
in the projected amount of ceded reinsurance recoverables and the ratings and
credit worthiness of reinsurers; (e) actual loss experience from insured or
reinsured events and the timing of claims payments being faster or the receipt
of reinsurance recoverables being slower than anticipated; (f) increased
competition on the basis of pricing, capacity, coverage terms or other factors
such as the increased inflow of third party capital into reinsurance markets,
which could harm either XL`s or Catlin`s ability to maintain or increase its
business volumes or profitability; (g) greater frequency or severity of claims
and loss activity than XL`s or Catlin`s respective underwriting, reserving or
investment practices anticipate based on historical experience or industry data;
(h) changes in the global financial markets, including the effects of inflation
on XL`s or Catlin`s business, including on pricing and reserving, increased
government involvement or intervention in the financial services industry and
changes in interest rates, credit spreads, foreign currency exchange rates and
future volatility in the world`s credit, financial and capital markets that
adversely affect the performance and valuation of either XL`s or Catlin`s
investments, financing planning and access to such markets or general financial
condition; (i) changes in ratings, rating agency policies or practices; (j) the
potential for changes to methodologies, estimations and assumptions that
underlie the valuation of XL`s or Catlin`s respective financial instruments that
could result in changes to investment valuations; (k) changes to XL`s or
Catlin`s respective assessment as to whether it is more likely than not that it
will be required to sell, or has the intent to sell, available-for-sale debt
securities before their anticipated recovery; (l) the ability of XL`s or
Catlin`s subsidiaries to pay dividends; (m) the potential effect of legislative
or regulatory developments in the jurisdictions in which XL or Catlin operates,
such as those that could impact the financial markets or increase their
respective business costs and required capital levels, including but not limited
to changes in regulatory capital balances that must be maintained by operating
subsidiaries and governmental actions for the purpose of stabilizing the
financial markets; (n) the actual amount of new and renewal business and
acceptance of products and services, including new products and services and the
materialization of risks related to such products and services; (o) changes in
applicable tax laws, tax treaties or tax regulations or the interpretation or
enforcement thereof; (p) the effects of mergers, acquisitions, divestitures and
retrocession agreements; and (q) in the case of XL, the other factors set forth
in XL`s reports on Form 10-K, Form 10-Q and other documents on file with the
SEC.
Additionally, the Acquisition is subject to risks and uncertainties,
including:(i) XL and Catlin may be unable to complete the Acquisition because,
among other reasons, conditions to the completion of the Acquisition may not be
satisfied or waived, including the failure to obtain required regulatory
approvals, or the other party may be entitled to terminate the Acquisition; (ii)
receipt of regulatory approvals required by the Acquisition may be subject to
conditions, limitations and restrictions that could negatively impact the
business and operations of the combined company; (iii) uncertainty as to the
timing of completion of the Acquisition; (iv) the ability to obtain approval of
the Acquisition by Catlin Shareholders; (v) uncertainty as to the actual premium
(if any) that will be realised by Catlin Shareholders in connection with the
Acquisition;(vi) uncertainty as to the long-term value of XL ordinary shares to
be issued to Catlin Shareholders in connection with the Acquisition; (vii)
inability to retain key personnel of Catlin or XL during the pendency of the
Acquisition or after completion of the Acquisition; (viii) failure to realise
the potential synergies from the Acquisition, including as a result of the
failure, difficulty or delay in integrating Catlin`s businesses into XL; (ix)
the ability of the Catlin Board to withdraw its recommendation of the
Acquisition; and (x) the outcome of any legal proceedings to the extent
initiated against XL, Catlin and others relating to the Acquisition, as well as
XL and Catlin`s management`s responses to any of the aforementioned factors.
Neither Catlin nor XL undertakes any obligation to update publicly or revise any
forward-looking statement, whether as a result of new information, future
developments or otherwise.
Disclosure Requirements
Catlin is a Bermuda company and is therefore not subject to the Code.
Accordingly, shareholders of Catlin and others dealing in Catlin Shares are not
obliged to disclose any of their dealings under the provisions of the
Code.However, market participants are requested to make disclosures of dealings
as if the Code applied and as if Catlin were in an "offer period" under the
Code. Catlin Shareholders and persons considering the acquisition or disposal of
any interest in Catlin Shares are reminded that they are subject to the
Disclosure and Transparency Rules made by the UKLA and other applicable
regulatory rules regarding transactions in Catlin Shares.
Catlin`s website contains the form of disclosure requested. If you are in any
doubt as to whether or not you should disclose dealings, you should contact an
independent financial adviser authorised by the Financial Conduct Authority
under the FSMA (or, if you are resident in a jurisdiction other than the U.K., a
financial adviser authorised under the laws of such jurisdiction).
In light of the foregoing, as provided in Rule 8.3(a) of the Code, any person
who is "interested" in one per cent. or more of any class of "relevant
securities" of Catlin or of any "securities exchange offeror" (being any
"offeror" other than an "offeror" in respect of which it has been announced that
its "offer" is, or is likely to be, solely in "cash") should have made an
Opening Position Disclosure following the commencement of the "offer period"
which began when the Possible Offer Announcement was released on 17 December
2014.
An Opening Position Disclosure should contain details of the person`s interests
and short positions in, and rights to subscribe for, any "relevant securities"
of each of (i) Catlin and (ii) any "securities exchange offeror(s)". Persons to
whom Rule 8.3(a) would have applied had the Code been applicable should have
made an Opening Position Disclosure by no later than 3:30 p.m. (London time) on
the tenth "business day" following the commencement of the "offer period" which
began when the Possible Offer Announcement was released on 17 December 2014.
Relevant persons who undertake "dealings" in the "relevant securities" of Catlin
or of a "securities exchange offeror" prior to the deadline for making an
Opening Position Disclosure should instead make a Dealing Disclosure.
Rule 8.3(b) of the Code provides that if any person is, or becomes "interested"
(directly or indirectly) in one per cent. or more of any class of "relevant
securities" of an offeree or of any "securities exchange offeror", all
"dealings" in any "relevant securities" of that offeree or of any "securities
exchange offeror" (including by means of an option in respect of, or a
derivative referenced to, any such "relevant securities") should be publicly
disclosed in a Dealing Disclosure by no later than 3:30 p.m. (London time) on
the "business day" following the date of the relevant transaction.In a situation
where the Code applies, this requirement would continue until the date on which
any "offer" becomes, or is declared, unconditional as to acceptances, lapses or
is otherwise withdrawn or on which the "offer period" otherwise ends.Under Rule
8 of the Code, a Dealing Disclosure would contain details of the "dealing"
concerned and of the person`s interests and short positions in, and rights to
subscribe for, any "relevant securities" of (i) Catlin and (ii) any "securities
exchange offeror", save to the extent that these details have previously been
disclosed under Rule 8.
Accordingly, in the case of both an Opening Position Disclosure and Dealing
Disclosure (if any), disclosures of interests in the shares of each of XL and
Catlin should be made.
If two or more persons act together pursuant to an agreement or understanding,
whether formal or informal, to acquire an "interest" in "relevant securities" of
Catlin or a "securities exchange offeror", they would, if the Code were
applicable, be deemed to be a single person for the purpose of Rule 8.3 of the
Code.
Consistent with the provisions of Rule 8.1 of the Code, Opening Position
Disclosures should be made by Catlin and by any "offeror", and all "dealings" in
"relevant securities" of Catlin by Catlin, by any "offeror" or by any persons
"acting in concert" with any of them, should be disclosed in a Dealing
Disclosure by no later than 12:00 p.m. (London time) on the "business day"
following the date of the relevant transaction.
"Interests in securities" arise, in summary, when a person has long economic
exposure, whether conditional or absolute, to changes in the price of
"securities".In particular, a person will be treated as having an "interest" by
virtue of the ownership or control of "securities", or by virtue of any option
in respect of, or derivative referenced to, "securities".
Terms in quotation marks are defined in the Code, which can be found on the
Panel`s website.If you are in any doubt as to whether or not you should disclose
a "dealing" by reference to the above, you should contact an independent
financial adviser authorised by the FCA under the FSMA.
No Profit Forecasts or Estimates
No statement in this announcement is intended as a profit forecast or estimate
of the future financial performance of XL, Catlin or the Enlarged XL Group
following completion of the Acquisition for any period unless otherwise stated.
Furthermore, no statement in this announcement should be interpreted to mean
that: (a) earnings or earnings per Catlin Share for Catlin for the current or
future financial years would necessarily match or exceed the historical
published earnings or earnings per Catlin Share; or (b) earnings or earnings per
XL Share for XL for the current or future financial years would necessarily
match or exceed the historical published earnings or earnings per XL Share.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION.
THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS OR PROSPECTUS
EQUIVALENT DOCUMENT AND INVESTORS SHOULD NOT MAKE ANY DECISION IN RELATION TO
THE NEW XL SHARES OR THE ACQUISITION EXCEPT ON THE BASIS OF THE INFORMATION IN
THE IRISH PROSPECTUS AND THE CIRCULAR WHICH ARE PROPOSED TO BE PUBLISHED IN DUE
COURSE.
9 January 2015
RECOMMENDED ACQUISITION
of
Catlin Group Limited
by
XL Group plc
1.Introduction
XL and Catlin are pleased to announce that they have agreed the terms of a
recommended cash and share acquisition of the entire issued and to be issued
share capital of Catlin by XL.
It is intended that the Acquisition will be effected by means of a two-step,
integrated process comprising a scheme of arrangement under Section 99 of the
Bermuda Companies Act, followed immediately by the merger of Catlin with and
into XL Sub such that XL Sub is the surviving company, under Section 104H of the
Bermuda Companies Act. XL Sub is a wholly owned subsidiary of XL incorporated in
Bermuda for the purpose of completing the Acquisition.
2. The Acquisition
The Acquisition will be subject to the Conditions and further terms set out
below and in Appendix I to this announcement and to the full terms and
conditions which will be set out in the Circular.
The total value receivable by Catlin Shareholders comprises:
for each Catlin Share 388 pence in cash
and
0.130 New XL Share
together, the Acquisition Consideration
plus
the expected 2014 Final Dividend payable by Catlin of 22 pence in cash to Catlin Shareholders on the relevant record date
Based on the Closing Price of $35.42 per XL Share and the exchange rate of
$1.5084:£1 on 8 January 2015 (being the latest practicable date prior to the
date of this announcement), the Acquisition (together with the expected 2014
Final Dividend but excluding the ITB Special Dividend) values each Catlin Share
at approximately 715.3 pence and the entire issued and to be issued share
capital of Catlin at approximately £2.79 billion.
In addition, XL and Catlin have also agreed that, subject to completion of the
disposal of Catlin`s investment in ITB and receipt of the proceeds therefrom,
the Catlin Board may declare and pay the ITB Special Dividend to Catlin
Shareholders, out of the distributable surplus from the sale of ITB, of up to
12.3 pence per Catlin Share, based on Catlin`s fully diluted share number on the
relevant record date. The Catlin Board expects that the disposal of ITB will
complete during the first quarter of 2015 and, accordingly, to declare and pay
the ITB Special Dividend promptly thereafter. In the event that the disposal of
ITB is reasonably expected to complete on or after the Effective Date, the
parties will, reasonably and in good faith, discuss with a view to reaching
agreement, subject to applicable law, on a means by which the ITB Special
Dividend would, subject to completion of the disposal of ITB and receipt of the
proceeds therefrom, be paid to Catlin Shareholders listed on the register at the
Scheme Record Time, notwithstanding that completion of the Acquisition would
take place before completion of the disposal of ITB and receipt of the proceeds
therefrom.
The expected 2014 Final Dividend (which is expected to be announced with
publication of Catlin`s preliminary results on or about 12 February 2015) and
the ITB Special Dividend would be receivable by Catlin Shareholders on the
register at the relevant record date, which will be announced when such
dividends are declared. The Acquisition Consideration would be receivable by
Catlin Shareholders on the register at the Scheme Record Time (shortly before
the Effective Date).
The Acquisition Consideration, together with the expected 2014 Final Dividend
but excluding the ITB Special Dividend, represents a premium of approximately:
* 22.9 per cent. to the Closing Price per Catlin Share of 582 pence on 16
December 2014 (being the last Business Day prior to the date of the Possible
Offer Announcement);
* 26.3 per cent. to the volume weighted average Closing Price per Catlin Share
of 566 pence for the month ended on 16 December 2014 (being the last Business
Day prior to the date of the Possible Offer Announcement);
* 33.0 per cent. to the volume weighted average Closing Price per Catlin Share
of 538 pence for the three months ended on 16 December 2014 (being the last
Business Day prior to the date of the Possible Offer Announcement); and
* 8.3 per cent. to the Closing Price per Catlin Share of 660.5 pence on 8
January 2015 (being the last Business Day prior to the date of this
announcement).
A Mix and Match Facility will be provided which will allow Catlin Shareholders
(other than certain Overseas Shareholders) to elect to vary the proportions in
which they receive New XL Shares and cash.
3.Background to and Reasons for the Acquisition
XL and Catlin have for some time shared a belief in the benefits of creating a
combined company. Whilst both companies are well positioned to succeed on their
own, they each feel that in combination they will be better positioned to deal
with some of the challenges posed by key market forces shaping the Property and
Casualty insurance sector including:
* the concentrated nature of the broker market;
* the pressure for underwriting organisations to be increasingly global in
support of clients;
* the need to invest in better, more expensive and more advanced data and
analytics systems;
* the need to harness alternative capital opportunities; and
* the increasing capital levels and implementation costs required by regulators
in various jurisdictions.
XL believes that the combination of XL and Catlin will result in a broader,
better balanced, and more efficient underwriting platform, by bringing together
two highly compatible cultures based on being best in-class, underwriting-driven
organisations. The Acquisition is expected to result in double-digit EPS and
meaningful ROE accretion, upon full phase-in of the expected synergies described
in paragraph 4 below, and to yield an estimated internal rate of return well in
excess of cost of capital. Whilst the parent company of the Enlarged XL Group
will remain XL Group plc, the intention is to market the combined business as XL
Catlin, reflecting the strong reputation of both brands.
Enhanced Scale and Broader Product Offerings
With a combined $17 billion of total capital, and approximately $10 billion of
combined net premiums written based on the 31 December 2013 audited financial
statements of each company, the Enlarged XL Group is anticipated to achieve
significant scale within its core competencies of global specialty insurance and
reinsurance. The Enlarged XL Group expects to be able to access clients through
a variety of channels, including Lloyd`s, where Catlin is the largest
underwriting syndicate, and through the enhanced global network of the Enlarged
XL Group. Both XL and Catlin have made significant investments in international
offices and underwriting hubs - the combination of which is anticipated to
increase the relevance of each company in these regions and therefore enable the
Enlarged XL Group to participate in the most attractive underwriting
opportunities across the regions.
In specialty insurance, the Enlarged XL Group will benefit from Catlin`s core
Lloyd`s businesses, such as Aviation, Marine and Energy, in which the combined
company will represent a best in class platform, and expects to be among the
world`s largest writers in many lines, including Aerospace (in which it expects
to be among the world`s top 3 writers), Fine Art & Specie (in which it expects
to be among the world`s top 3 writers), Political Risk and Crisis Management (in
which it expects to be among the world`s top 5 writers). Increased relevance
with brokers will be enhanced through greater premium volume, broader product
offering and an expanded global network. Approximately $2.8 billion of combined
ceded reinsurance will allow for increased purchasing power and further
optimisation with the reinsurance and retrocession markets. In addition, XL
expects to achieve a significant scale increase in the reinsurance market,
establishing its position as the 8th largest property catastrophe reinsurer by
net premiums written and a global reinsurer with multi-line capabilities, with
net premiums written nearly doubling to over $3 billion. This affirms XL`s
position as a leading global reinsurer and will, XL believes, importantly
position the Enlarged XL Group as a top 3 property catastrophe writer among
broker market peers, based on the combined historical gross premiums written for
both companies in 2013 of $1.3 billion. XL believes that this will significantly
increase its attractiveness and flexibility to third party capital providers.
The Enlarged XL Group`s greater size will also enable it to leverage more
effectively the investments in technology and data analytics that XL believes
all underwriting organisations will have to make over the next few years.
Increased Efficiency
Significant opportunities exist for Catlin and XL to consolidate their
operations where there are overlapping footprints in multiple jurisdictions.
Examples of areas in which the Enlarged XL Group would be able to achieve
greater efficiency include consolidation of the combined infrastructure related
to technology, real estate, and operations as well as consolidation of business
and central support functions.
Culturally Compatible Organisations
Similar to XL, Catlin is first and foremost an underwriting business focused on
the core principles of discipline, diversification and underwriting
profitability. As a result of this focus, Catlin has produced a consistently low
loss ratio, averaging 58.7% over the last 5 years. Catlin has released reserves
every year since its initial public offering and admission to listing on the
London Stock Exchange in 2004. Catlin`s underwriting-driven culture is embodied
in its senior management team, led by Mr. Catlin, the founder and Chief
Executive Officer, who commenced underwriting at Lloyd`s in 1973. Mr. Catlin`s
continued involvement in the Enlarged XL Group as Executive Deputy Chairman,
along with the senior role to be assumed by Paul Brand, Catlin`s Chief
Underwriting Officer, will ensure continuity and consistency in the
organisation`s core values and business practices.
Acquisition Accretive to XL`s EPS and ROE
XL expects to issue approximately $1.8 billion of New XL Shares in connection
with the Acquisition (based on the Closing Price per XL Share of $35.42 on 8
January 2015). Although XL has entered into the Bridge Facility, it expects that
the cash component of the Acquisition Consideration will be funded with cash on
hand and through the issuance of Solvency II compliant fixed income securities
consistent with XL`s financial strength ratings. This funding structure,
combined with the operating and other efficiencies described above, are expected
to lead to double-digit EPS and meaningful ROE accretion, upon full phase-in of
the expected synergies described in paragraph 4 below. The Acquisition is also
expected to result in a positive impact to EPS and ROE in the first full year
following completion of the Acquisition. The Enlarged XL Group will have debt
and preferred equity of $4.7 billion on completion of the Acquisition, resulting
in leverage of under 30 per cent. on completion of the Acquisition (which would
be intended to reduce over time).
4.Financial Benefits of the Acquisition
XL, having reviewed and analysed the potential benefits of the Acquisition,
based on its experience of operating in the insurance sector, and taking into
account the factors it can influence, believes that the Enlarged XL Group will
be able to achieve cost synergies of at least $200 million on a recurring basis.
It is expected that the full recurring synergies will be achieved by the end of
2017.
The principal sources of potential quantified synergies are as follows:
* approximately 50 per cent. of the identified synergies are to be generated
from consolidation of infrastructure related to technology, real estate and
operational overlap; and
* approximately 50 per cent. of the identified synergies are to be generated
from the consolidation of business and central support functions.
In addition to these potential quantified synergies, XL believes that
significant further value can be created through realisation of incremental
capital, financial and business benefits, including:
* enhanced scale, creating enhanced relevance to brokers;
* greater ability to deliver solutions to clients globally in specialty lines
and in property catastrophe reinsurance; and
* enhanced opportunities to gain efficiencies from greater size, particularly to
meet increasing costs and requirements from regulators.
The integration of the businesses will require combining the Catlin businesses
and group functions into XL, with selection of the optimal platforms and
operating model.
It is envisaged that the realisation of the potential quantified synergies will
result in one-off integration costs of approximately $250 million (in
aggregate), which are all anticipated to be incurred by the end of 2017.
As has been the case in prior transactions which combined insurance or
reinsurance companies, XL expects to face some challenges in retaining the total
amount of combined premiums written. Given the inherent uncertainty of the
factors which may influence this, XL is unable to provide an estimate of the
possibly material impact the combination could have in this regard. XL intends
to take steps to minimise any such effects.
The identified synergies will accrue as a direct result of the Acquisition and
would not be achieved on a standalone basis.
These statements are not intended as a profit forecast and should not be
interpreted as such.
Appendix IV to this announcement includes a copy of this Quantified Financial
Benefits Statement and the bases of belief. Appendix IV to this announcement
also includes reports from each of Ernst & Young, Morgan Stanley and Goldman
Sachs International in connection with such Quantified Financial Benefits
Statements. Furthermore, each of Ernst & Young, Morgan Stanley and Goldman Sachs
International has given and not withdrawn its consent to the publication of its
report in the form and context in which it is included.
5.Recommendation
The Catlin Directors, who have been so advised by J.P. Morgan Cazenove and
Evercore, consider the terms of the Acquisition to be fair and reasonable. In
providing their advice to the Catlin Directors, J.P. Morgan Cazenove and
Evercore have taken into account the commercial assessments of the Catlin
Directors.
Accordingly, the Catlin Directors
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