(Reuters) - Property and casualty insurer Endurance Specialty Holdings Ltd ENH.N will buy reinsurer Montpelier Re Holdings Ltd MRH.N for about $1.83 billion to expand into the Lloyd’s of London underwriting business.
The cash-and-stock deal comes nearly a year after Endurance failed in its attempts to acquire Aspen Insurance Holdings Ltd AHL.N, which has a sizeable Lloyd’s business.
Montpelier shareholders will get 0.472 Endurance share and $9.89 in cash for each share held, the companies said on Tuesday.
This represents $40.24 per share for Montpelier, a 5.5 percent premium to the stock’s closing on Monday.
Montpelier shares rose as much as 5 percent to a 10-year high of $40.23 in early trading, while Endurance shares fell about 3 percent.
A slump in reinsurance prices due to intense competition is piling pressure on smaller companies to diversify or consolidate, leading to a flurry of deals in the Lloyd’s market.
Canadian property and casualty insurer Fairfax Financial Holdings (FFH.TO) said last month that it would buy Brit Plc BRIT.L for about $1.88 billion to become one of the top five underwriters in the market.
XL Group XL.N snapped up Lloyd’s of London’s Catlin Group CGL.L for $4.22 billion in January and Qatar Insurance Group acquired underwriter Antares last year.
“Even though one plus one may not equal two, the sum of those two will make us much more relevant for our clients,” Endurance Chief Financial Officer Mike McGuire said on a conference call on Tuesday.
The transaction, which is expected to close in the third quarter of 2015, consists of $450 million in cash and about 21.5 million Endurance shares, the companies said.
Montpelier’s shareholders will own about 32 percent of the combined company.
Montpelier shares were up 2.3 percent at $38.97, while Endurance shares were down about 3 percent at $62.30.
Morgan Stanley & Co LLC and Jefferies LLC were Endurance’s financial advisers and Skadden, Arps, Slate, Meagher & Flom LLP its legal adviser.
Credit Suisse Securities LLC was Montpelier’s financial adviser and Cravath, Swaine & Moore LLP its legal adviser.
Additional reporting by Anil D'Silva in Bengaluru; Editing by Kirti Pandey