XL Group plc ( XL ) is in talk with Catlin Group Ltd. to acquire the latter and form a combined entity.
If the companies work out the acquisition and the subsequent merger, these would need approvals by the boards of directors of both companies and shareholders along with the required regulatory nod and completion of diligence.
As per sources, XL Group could pay $3.9 billion for the acquisition, combining cash and shares.
Hamilton, Bermuda-based Catlin Group is a provider of diversified specialty property and casualty insurance and reinsurance products across the globe, having a leadership presence at Lloyd's. The transaction will straightaway widen quite a few lines of business of XL Group in which it has lately made investments.
The merger will position the combined entity as a leader in the global specialty and property cat market. Capitalizing on the expertise in both companies, management could make better use of their global networks and infrastructure. In addition, the combined entity would also rank among the top 10 players in the competitive reinsurance market with swelling alternative capital opportunities at its disposal.
If the transaction materializes, it will be immediately accretive with an expanded scale and skill resulting in economies from the first year. The transaction will also result in long-term value for shareholders. Shares of Catlin Group gained about 11% with the merger talks making news.
XL Group has been reorganizing its structure so that it improves its risk profile. As such XL Insurance (Bermuda) Ltd. divested its wholly owned subsidiary, XL Life Reinsurance (SAC) Ltd ("XLLR"), to GreyCastle Holdings Ltd. for $570 million in cash.
XL Group boasts a record of delivering positive earnings surprise with the last four-quarter average being 17.76%. We believe that riding on its operational strength, the property and casualty insurer will keep the momentum going.
Currently, XL Group carries a Zacks Rank #3 (Hold).
It seems the takeover saga rages in the insurance space as insurers opt the inorganic route to ramp up their operational performance. Recently, The Progressive Corp. ( PGR ) inked a deal to buy the majority stake in ARX Holding Corp., the parent company of American Strategic Insurance (ASI) and its affiliates, for a cash consideration $875 million. The acquisition well positions Progressive to better serve customers opting for a combination of home and auto insurance.
Earlier this month, Kemper Corp. ( KMPR ) agreed to buy Alliance United Group and its wholly owned subsidiaries for a cash consideration of $70 million in order to expand its presence in California. Last month, Allied World Assurance Company Holdings, AG's ( AWH ) subsidiary also inked a deal to acquire Latin American Holdings Ltd. to strengthen its specialty business.
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