It’s happening – after it was reported last month that a consortium led by Arch Capital Group offered to snap up Watford Holdings, Arch has now announced having entered into a definitive agreement to acquire all of Watford’s common shares in an all-cash deal valued at approximately US$622 million (around £477.5 million).
“Under the terms of the agreement, Watford shareholders will receive US$31.10 in cash for each Watford common share they hold,” detailed Arch, which currently owns approximately 13% of Watford’s outstanding shares.
“This consideration represents a premium of approximately 74% to Watford’s unaffected closing common share price on September 08, 2020, the last trading day prior to media reports about the possibility of a transaction between Watford and Arch.”
For Watford president and chief executive Jon Levy, the sale signifies “a clear path forward” for the property and casualty (re)insurer, whose operating subsidiaries’ financial strength ratings were placed under review with negative implications by A.M. Best in May.
Levy, who sees the transaction as delivering an attractive premium to shareholders, added: “We believe that Watford will be better positioned as a standalone business within Arch to execute its strategic priorities and growth plans.
“Importantly, we expect a seamless transition for our clients, trading partners, and policyholders, who we think will benefit from Watford becoming part of a larger organisation with greater resources.”
As mentioned, Watford will continue to operate as a standalone business while remaining consolidated within Arch’s financials. Subject to closing conditions including regulatory and shareholder approval, the acquisition is expected to be finalised in the first quarter of 2021.
Meanwhile, the Bermuda-headquartered insurance group said it retains the flexibility to bring in additional investment partners as co-investors in the deal, which will be funded through cash from Arch’s balance sheet.
“Since we launched Watford in 2014, the company has been a valued part of the Arch story and we are pleased to deepen our existing strategic and financial investment,” commented Arch president and CEO Marc Grandisson.
“Our longstanding contractual partnership with and financial consolidation of Watford expedited the due diligence process and should give all stakeholders confidence in our ability to close this transaction quickly. Watford’s policyholders and trading partners will benefit from the continued underwriting strength and service they have come to expect from Watford and Arch.”