US insurer Tower Group reports that it had exercised its option to merge with Bermuda-based reinsurer Canopius Holdings Bermuda Ltd and Canopius Bermuda Ltd, together operating as Canopius Bermuda.
The combination will provide a platform for Tower to become a global speciality insurance company with increased profitability and diversified offering.
In April, Tower agreed to pay $75m to buy a 10.7% stake in Canopius conditional on the completion of Canopius' acquisition of Omega Insurance Holdings. It also signed a deal, under which Canopius was set to help Tower to establish presence at Lloyd's and gave Tower an option to combine with it.
With the exercise of the option, a unit of Canopius Bermuda will acquire all shares of Tower, but the latter will be considered the acquiring entity. It paid Canopius a $1m fee to exercise the option.
Based on yesterday's share price of Tower, the company expects that its shareholders will control over 75% of the combined group and that the deal will add to its earnings. Tower stockholders will get a mixture of cash and stock for each of their shares.
The transaction could be terminated, if Canopius fails to complete its acquisition of Omega or to get regulatory and shareholder clearance.
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