Aspen Insurance Holdings Ltd.
) turned down the offer to be acquired by
Endurance Specialty Holdings Ltd.
) for $3.2 billion citing that it is not in favor of its
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Endurance Specialty has been approaching Aspen Insurance since
late Jan 2014 and this $3.2 billion offer is a new addition to
Endurance Specialty offered to buy each share of Aspen Insurance
for $47.50, which was 11% more than the latter's closing price of
$39.37 on April 11, 2014. In this regard, Aspen Insurance's
shareholders can opt for cash, 0.8826 of an Endurance Specialty
share, or a combination of both, for each share held.
Endurance Specialty has a sturdy financial position including
strong cash balance and good cash flow from operations that would
support the acquisition. The company also reported solid earnings
results in the last reported quarter. The proposed acquisition
would only enrich the numbers, going forward
Endurance Specialty believes the merging of the two companies
would increase its profitability as well as reduce annual costs
by more than $100 million, inducing an upward pressure on the
company's earnings per share. Moreover, Endurance Specialty
believes the combined entity would derive over $5 billion of
gross premiums annually.
However, Aspen Insurance believes the offer made has undervalued
the company. Also, there exists strategic mismatch between the
two companies which can cause significant execution risk. Aspen
Insurance itself has a proven track record of performance and it
has its own strategy to enhance shareholders' value.
Additionally, the company has been witnessing operational
synergies of late which increase its competitiveness in the
Aspen does not consider Endurance a strategic fit for several
reasons. According to Aspen, Endurance has an unprofitable
insurance business and an unstable crop business. Moreover,
Endurance's open disregard of Llyod's, the primary catalyst of
Aspen's international insurance business is a major reason
inducing Aspen's disinterest in the merger.
Aspen Insurance and Endurance Specialty are top-ranked stocks in
the property and casualty insurance space, both sporting a Zacks
Rank #1 (Strong Buy). Some other stocks worth mentioning in the
same space include
AmTrust Financial Services, Inc.
). Both these stocks sport a similar Zacks Rank #1.