Validus stakeholders will get $68 a share, the companies said in a statement yesterday. That represents a 46% premium over the stock’s closing price on Friday. The acquisition will immediately start adding to AIG’s earnings and return on equity, they said.
AIG is back in the market for large-scale deals. The insurer was in talks to buy Voya Financial Inc in a transaction valued at more than $10bn before negotiations fell apart in November over the price, people familiar with the matter said earlier this month. Those talks signalled AIG chief executive officer Brian Duperreault’s interest in completing big transactions after years of cost cuts and strategy shifts.
“Validus is an excellent strategic fit for AIG, bringing new businesses and capabilities to our general insurance operation, expanding the bench of our management team and deepening our underwriting expertise,” Duperreault said in the statement.
North American insurers have been expanding in speciality business lines to counter tougher pricing competition on consumer and traditional property coverage.
Prem Watsa’s Fairfax Financial Holdings Ltd agreed in late 2016 to buy Allied World Assurance Co, and Boston-based Liberty Mutual Holding Co completed the purchase last year of Ironshore Inc from Fosun International Ltd for about $3bn. Validus, which had a market value of about $3.71bn on Friday, provides protection for primary insurance companies that focuses on catastrophe, marine and speciality reinsurance, according to the statement.
The acquisition gives AIG a Lloyd’s of London syndicate, the Western World US speciality property and casualty underwriter, and Crop Risk Services, which provides coverage to the North American crop insurance market.
Shares of Validus rose to $67.16 from $46.72 on Friday at 7:23 a.m. in early New York trading. AIG declined to $60.50 from $61.55.
Citigroup Inc, Perella Weinberg Partners LP and Debevoise & Plimpton LLP advised AIG on the transaction. Validus was advised by JPMorgan Chase & Co and Skadden, Arps, Slate, Meagher & Flom LLP.
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