To enhance its insurance business, Bermuda based Enstar Group Limited (ESGR) has inked a deal to acquire global specialty insurer Torus Insurance Holdings Limited. The purchase consideration equates to $692 million.
Enstar will partially finance the deal by issuing 1.9 ordinary voting shares and 0.7 million newly created non-voting preferred shares. These shares sum up to $346 million or 50% of the purchase consideration.
Out of the remaining $346 million of the purchase price, Enstar will provide $69 million in cash and the other $277 million will be provided by affiliates of Stone Point Capital LLC through an equity co-investment. Stone Point is a private equity firm that makes investments and manages financial services businesses. The deal is expected to culminate by the end of 2013.
In addition to Torus, StonePoint has also partnered with Enstar for its previously announced acquisitions of Atrium Underwriting Group and Arden Reinsurance Company.
Stone Point affiliates will provide up to $106 million of equity capital for the acquisition of Atrium Underwriting Group and Arden Reinsurance Company from Arden Holdings Limited which was announced in Jun 2013 to provide live underwriting services. This deal is also expected to culminate by the end of 2013. On culmination of both the aforementioned deals, Enstar and Stone Point will have an ownership interest of 60% and 40% respectively in Torus and Arden Holdings.
The company has been taking frequent steps to foray into the live insurance market. At this juncture, the aforementioned endeavors make us pose an optimistic stance on the company. First, the acquisition of Atrium is in line with the company’s objective of portfolio expansion. Second, the company has also been working towards enhancing its existing business.
The acquisition of Torus satisfies this aim of the company by enhancing its core legacy operations. Last but not least, the partnership with Stone Point for the past 13 years have proved successful and is thus expected to add value to the above acquisitions.
Concurrently, Enstar has entered into an amended and restated five-year revolving credit facility with National Australia Bank, Barclays Bank and Royal Bank of Canada, effective Jul 2018. As per this deal, Enstar can borrow up to $375 million for a coupon rate of LIBOR plus 2.75% for amounts drawn and 1.1% commitment fee on undrawn funds.
Enstar currently carries a Zacks Rank #1 (Strong Buy). Among other favorable names in the insurance industry, Cigna Corp. (CI), CNO Financial Group Inc. (CNO) and Assured Guaranty Ltd (AGO) also carry a Zacks Rank #1 (Strong Buy).
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