DUBLIN, Ireland, January 9, 2015 /PRNewswire/ --
- Expected to Create a Leader in Global Specialty
Insurance and Reinsurance Markets
- Expected to Create Double Digit EPS and Meaningful ROE
Accretion
XL Group plc (NYSE: XL) today announced that it has entered into
an agreement under which XL will offer to acquire all of the
capital stock of Catlin Group Limited (LSE: CGL) to form a combined
business which is expected to have a leading presence in the global
specialty insurance and reinsurance markets. Under the terms
of the transaction, XL will acquire all of Catlin's common shares
for consideration of 388 pence in
cash and 0.130 share of XL for each Catlin common share. On
the basis of the closing price of an XL share on 8, January of
$35.42 the offer values Catlin at
693 pence per share. This
represents a transaction equity value of approximately $4.1 billion dollars. In addition, Catlin
shareholders will receive a 22p final dividend to be paid in Q1
2015.
The transaction represents a premium of 23.5% to Catlin's
closing share price as of December 16,
2014 the date prior to each company having publicly
confirmed discussions regarding a transaction. The
transaction is structured as a scheme of arrangement and is
expected to close mid-2015, subject to approval of Catlin
shareholders and sanction by the Supreme Court of Bermuda, customary regulatory approvals and
anti-trust clearances, and other customary closing conditions.
Following the completion of the transaction, the name of the
parent company of the combined group will remain XL Group plc, and
the newly combined company will be marketed as XL Catlin,
reflecting the strong reputation of both brands.
XL CEO Mike McGavick commented:
"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."
McGavick continued, "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."
Catlin CEO Stephen 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."
Business Combination
With $17B of total capital and
approximately $10B of net premium,
based on the December 31, 2013
audited financials of each company, the combined company will
achieve significant scale within its core competencies of global
specialty insurance and reinsurance. Additionally, the
combination of XL's and Catlin's business platforms is expected to
generate compelling benefits:
- Increased relevance with brokers through greater premium
volume, broader product offering and an expanded global network,
particularly given an enlarged Lloyd's platform with Catlin having
a leading Lloyd's presence
- Top tier in many of the specialty lines in which XL has
recently invested including Political Risk and Crisis Management,
will add to leading positions in Aerospace, Fine Art &
Specie, and will have a best-in class Aviation, Marine and Energy
Platform
- More effectively leveraging investments in technology and data
analytics, as well as a larger dataset to build out predictive
modelling and analytics
- Approximately $2.8B of ceded
reinsurance to allow for increased purchasing power and further
optimization
- Top 10 global reinsurer with multi-line capabilities, with net
premiums written nearly doubling to over $3B
- Top three broker market property cat writer with enhanced third
party opportunities - leveraging talent and relationships from each
company to optimize combined platform
Leadership and Integration
Mike McGavick will continue as
CEO and it is expected that Stephen
Catlin will join the combined company as Executive Deputy
Chairman upon the closing of the transaction. It is also expected
that Mr. Catlin will serve on the Board of Directors. Peter Porrino will continue as Chief Financial
Officer. An additional Catlin director who meets applicable
independence and other qualifications is also expected to join the
XL board of directors in connection with the closing of the
transaction.
Having, over the last few years, led XL's Insurance operations
to profitability, Greg Hendrick,
currently XL's Chief Executive Insurance Operations, will have the
role of Chief Executive of Reinsurance, assuming responsibility for
the combined reinsurance business and leading all alternative
capital strategies. Until the transaction closes, John Welch, currently Chief Executive of XL's
North America Reinsurance operations, will lead reinsurance
operations at XL, given Jamie
Veghte' s recent retirement.
Paul Brand, Catlin's Chief
Underwriting Officer, will have the position of Chair Insurance
Leadership Team and Chief Underwriting Officer Insurance and will
have responsibility for capital allocation and purchasing outward
reinsurance for the group. Additionally, Kelly Lyles, currently XL's Head of Professional
Insurance will assume the position of Deputy Chair Insurance
Leadership Team and Chief Regional Officer Insurance. Mr. Brand and
Ms. Lyles will both report to Mike
McGavick and together will lead all aspects of insurance for
the combined company.
The integration planning team will be led by Myron Hendry, XL's Chief Platform Officer, with
support from the extended leadership teams of XL and Catlin.
The combined company will identify additional roles for many
of Catlin's senior management team post-integration, and plans to
create an organization that draws upon the talent of both XL and
Catlin's functional teams.
Financials
The transaction is expected to create an attractive return
profile with earnings per share and return on equity accretion in
2016, the first full year of combined operation, and double-digit
earnings per share accretion in 2017 upon full phase-in of expected
synergies. XL expects to issue approximately $1.8 billion of new XL shares in connection with
the acquisition. To satisfy the U.K. market practice of
transactions being "funds certain," XL has put in place a bridge
facility to backstop the funding of the cash elements of the
consideration.
It is expected that the combined entity will be able to achieve
annual cost synergies of at least $200
million, with the full level of these recurring synergies
being achieved by the end of 2017. The primary sources of
these cost synergies are expected through the consolidation of the
combined infrastructure related to technology, real estate, and
operational overlap as well as the consolidation of business and
central support functions. It is expected that the
realization of these cost synergies will result in one-time
integration costs of approximately $250
million which are all anticipated to be incurred by the end
of 2017.[1]
Conference Call and Webcast Information
A conference call to discuss the transaction will be held at
8:00 a.m. Eastern Time on
Friday, January 9, 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 (517) 308-9086 or (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 http://www.XLGroup.com and will be archived on XL's website from
approximately 10:30 a.m. Eastern Time
on Friday, January 9, 2015, through
midnight Eastern Time on Monday, February 9, 2015. A telephone replay of
the conference call will also be available beginning at
approximately 10:30 a.m. Eastern Time
on Friday, January 9, 2015, until
midnight Eastern Time on Monday, February 9, 2015, by dialing 888-568-0151
or 203-369-3462.
--------------------------------------------------
1. We are applying the Code but this is not pursuant to the
Code or for the purposes of Rule 28.
The basis of belief, principal assumptions and related reports
in respect of any "quantified financial benefits statement" or
statement on synergies is set out in the offer announcement
published on 9 January
2015.
Website
A slide presentation and other information regarding the
additional information regarding the transaction will be available
on http://xl.transactionannouncement.com.
Advisors
Morgan Stanley and Goldman Sachs served as financial advisors to
XL, and Skadden, Arps, Slate, Meagher & Flom LLP served as
legal advisor. JP Morgan Chase, Barclays and Evercore served as
financial advisors to Catlin, and Slaughter & May served as its
legal advisor.
About XL
XL Group plc (NYSE:XL), through its subsidiaries, is a global
insurance and reinsurance company providing property, casualty and
specialty products to industrial, commercial and professional
firms, insurance companies, and other enterprises throughout the
world. XL is the company clients look to for answers to their
most complex risks and to help move their world forward. To
learn more, visit http://www.XLgroup.com. Neither the contents of
XL's website, nor the contents of any other website accessible from
hyperlinks on such website, is incorporated herein or forms part of
this document.
About Catlin
Catlin Group Limited is a global P&C insurer and reinsurer
with six underwriting hubs in London, Bermuda, the United
States, Asia Pacific,
Europe, and Canada. Domiciled in Bermuda and listed on the London Stock
Exchange, Catlin has owned and managed the largest Lloyd's
syndicate since 2000. It has a network of offices in more
than 50 cities and offers access to local underwriting expertise
with more than 2,300 employees in 25 countries. Catlin shares are
traded on the London Stock Exchange (ticker symbol: CGL). More
information about Catlin can be found at http://www.Catlin.com.
Neither the contents of XL's website, nor the contents of any other
website accessible from hyperlinks on such website, is incorporated
herein or forms part of this document.
IMPORTANT INFORMATION
The information in this press release is provided for
informational purposes only and is neither an offer to purchase nor
a solicitation of an offer to sell, shares of XL or Catlin. Further
to the announcement by XL of its offer to acquire the entire issued
and to be issued share capital of Catlin (the "Offer"), (i) such
Offer will be made pursuant to the terms of a circular to be issued
by Catlin to its shareholders in due course setting out the terms
and conditions of the Offer, including details of how to vote in
respect of the Offer ("Circular"), and (ii) XL will in due course
publish a prospectus for the purposes of EU Directive 2003/71/EC
(together with any applicable implementing measures in any Member
State, the "Prospectus Directive") in relation to shares which will
be issued by it in connection with the Offer ("Prospectus").
Any decision in respect of, or in response to, the Offer
should be made only on the basis of the information in the Circular
and the Prospectus. Investors are advised to read the Circular and
the Prospectus carefully.
This document is an advertisement and not a prospectus for the
purposes of the Prospectus Directive. Accordingly, investors should
not subscribe for, or purchase, any securities referred to in this
document except on the basis of the information to be contained in
the Prospectus, when published, which will be prepared in
accordance with the Prospectus Directive. Copies of the Prospectus,
when published, will be available from XL's website at
http://www.XLgroup.com.
No statement in this document is intended as a profit forecast
or estimate of the future financial performance of XL, Catlin or
the combined group following completion of the Offer for any period
unless otherwise stated. Furthermore, no statement in this document
should be interpreted to mean that: (i) earnings or earnings per
share for Catlin for the current or future financial years would
necessarily match or exceed the historical published earnings or
earnings per share for Catlin; or (ii) earnings or earnings per
share for XL for the current or future financial years would
necessarily match or exceed the historical published earnings or
earnings per share for XL.
Certain information included in this press release has been
sourced from third parties. XL does not make any
representations regarding the accuracy, completeness or timeliness
of such third party information. Permission to cite such
information has neither been sought nor obtained.
Forward Looking Statements
This press release 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 United States
Securities and Exchange Commission.
Additionally, the acquisition of Catlin by XL (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 realized
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 realize 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 Catlin's board of directors 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 United Kingdom Takeover Code (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 UK Listing Authority 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
authorized by the UK Financial Conduct Authority under the UK
Financial Services and Markets Act 2000 (or, if you are resident in
a jurisdiction other than the U.K., a financial adviser authorized
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 percent 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 December 17, 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 December 17, 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 percent 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 UK Takeover 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 authorized by the UK Financial Conduct Authority under the
UK Financial Services and Markets Act 2000.
Total Shares in Issue
Catlin confirms that as at the close of business on January 8, 2015, being the latest practicable
date prior to the date of this announcement, it had 362,570,229
common shares in issue and admitted to trading on the Main Market
of the London Stock Exchange under ISIN reference BMG196F11004.
XL confirms that as at the close of business on January 8, 2015, being the latest practicable
date prior to the date of this announcement, it had 255,178,939
ordinary shares in issue and admitted to trading on the New York
Stock Exchange under ISIN reference IE00B5LRLL25.
Contact:
David Radulski
Investor Relations
+1-203-964-3470
Elliott Bundy
Media Relations
+1-203-674-6932
Sard Verbinnen & Co
New York: Drew Brown /Chris
Kittredge
+1-212-687-8080
London: Jonathan Doorley/Jennifer Stroud
+44(0)20-3178-8914
SOURCE XL Group Plc