* Offers $31/share, a premium of 34 pct
* Markel shareholders to own 69 pct of combined company
* Alterra shares up 26 pct; Markel down 5 pct
By Ashutosh Pandey
Dec 19 Specialty insurer Markel Corp
said it will buy Alterra Capital Holdings Ltd for about
$3 billion in cash and stock to diversify into reinsurance.
The offer of $31 per share represents a premium of 34
percent to Alterra's closing stock price of $23.15 on Tuesday.
Shares of Alterra opened slightly below the offer price, while
Markel's shares fell 5 percent to $462.
Each Alterra common share will be converted into a right to
receive 0.04315 Markel common shares plus a cash payment of $10.
"The addition of Alterra's reinsurance and large account
insurance portfolios will serve to diversify and strengthen
Markel's current book of specialty insurance business," Markel
Vice Chairman Steven Markel said in a statement.
Markel's shareholders will own about 69 percent of the
combined company, with Alterra's shareholders owning the rest.
Stifel Nicolaus analyst Meyer Shields was lukewarm on the
"We have enormous respect for Markel's underwriting and
investing expertise, but we think its M&A track record is
frankly less impressive," Shields wrote in a note to clients.
"Its last major acquisition (Terra Nova, in 2000)
experienced regular and significant adverse development for
years following the deal."
Markel has been venturing into sectors other than specialty
insurance in recent years, mirroring Warren Buffett's Berkshire
The insurer created Markel Ventures in 2005 to acquire an
assortment of companies including a baking equipment maker and
supplier of dredges.
Citigroup was the financial adviser to Markel, while BofA
Merrill Lynch advised Alterra.