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The long-running struggle for control of Omega Insurance looked to be nearing an end after its board backed a sweetened cash offer from rival Canopius, the second agreed takeover of a listed Lloyd’s of London business in as many months.
Canopius said after the London stock market closed on Wednesday that it had improved its previous 65p-a-share offer to 67p, valuing the equity of the target at £164m.
The bidder said shareholders who hold a total 49 per cent stake in Omega, whose board is led by John Coldman, former Brit Insurance chairman, had already agreed to support the transaction.
Omega has in effect been for sale for about 18 months after a spate of infighting during which its chairman and chief executive were replaced. Other interested parties have included Barbican and Haverford.
Canopius said the combination with Omega “would create a larger business capable of delivering improved returns, at a time when the outlook for the insurance underwriting cycle remains challenging for organic growth. The increased scale and diversification of the combined businesses would also leave the enlarged group better positioned to handle the forthcoming regulatory changes.”
Both Omega and its private equity-backed suitor made a loss last year, one of the costliest on record for natural catastrophes. Omega posted a pre-tax loss of $94.7m on gross premiums written of $304.6m, while Canopius made a loss of £61.1m on gross premiums written of £615.6m.
Canopius’ offer is pitched at 31 per cent premium to the average share price a month before it approached the target’s board in March. The bidder is funding the deal by raising £74m worth of fresh equity from both new and existing investors, increasing its credit facility by £30m and drawing on its cash reserves.
The new equity investor is Tower Group, the Nasdaq-traded US insurer, which is to take a 10.7 per cent stake in Canopius – if the Omega deal is completed – for $75m. Tower will gain a seat on the board and an option to merge its business with Canopius’ Bermudan reinsurance operations.
The bidder was advised by Keefe, Bruyette & Woods, Aon Benfield Securities and West Hill Corporate Finance. Omega was advised by Kinmont and Cenkos.