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Friday 12th June 2009: 22:48 |
Wall Street analysts continue to be negative on Validus takeover of IPC
Wall Street analysts have continued to be negative on Bermudian (re)insurer Validus' takeover of island rival IPC Holdings.
Analysts at Keefe, Bruyette & Woods said that it was still negative on Validus' $30.32 per share takeover of IPC Holdings, which looks as though it will go ahead following a decision by IPC's shareholders not to merge with rival Max Capital.
"We continue to look upon the deal as a negative for VR, particularly since it is now paying 94% of IPCR book value, including $40m in transaction costs and the $50m termination fee. We believe the resulting combination will have too large a concentration of catastrophe exposed business (particularly heading into Atlantic Hurricane season) and increased investment risk given the addition of IPCR's alternative portfolio."
KBW added: "Additionally, at the current price the deal offers extremely minimal accretion to book value, which was one of management's key positive bullet points when it first announced the deal."
However, it added: "We believe the deal would bring several positives, as it creates a larger and better capitalized company, and would allow VR the flexibility to grow recently added non-correlated lines; however, we believe near-term risks outweigh long-term positives."
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