Enstar’s Watford counter-offer may be deemed ‘superior’

The proposed Arch-Watford takeover deal may be in doubt after the reinsurance firm revealed that a counter-offer from the Enstar Group could be deemed as “superior”.

Last month, Arch Capital Group agreed a deal to acquire Watford Holdings in an all-cash transaction valued at $622m (£477m).

As part of the acquisition agreement, it was agreed Watford shareholders would receive $31.10 (£23.88) in cash for each Watford common share they hold.

However, Watford Holdings has announced in a statement that its board of directors has determined, in its “good faith judgment”, that an unsolicited, non-binding proposal from Enstar Group Limited to acquire the company’s common shares for $34.50 per share (£26.69), “could reasonably be expected to lead to a ‘Superior Proposal’” as defined in the company’s merger agreement with Arch Capital Group.

Under the merger agreement with Arch, the company said the determination by the company’s board allows it, subject to Enstar entering into an Acceptable Confidentiality Agreement with the company, to provide information to and conduct discussions and negotiations with Enstar.

Although the company said it could deem the approach as superior, it had not yet reached that determination.

It said: “The company’s board has not determined that Enstar’s proposal in fact constitutes a Superior Proposal under the current provisions of the merger agreement with Arch and has not changed its recommendation in support of the merger with Arch.

“There can be no assurance that the discussions with Enstar will result in the company’s board’s determination that the Enstar proposal is a Superior Proposal or the consummation of a transaction that is superior to the pending transaction with Arch or that the terms of any new transaction will be the same as those reflected in Enstar’s proposal.”

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