In relation to the pending merger between Tower Group, Inc. (TWGP) and Canopius Holdings Bermuda Limited, the latter has informed the former about the pricing of its shares to third party investors.
Canopius Group Ltd., the holding company of Canopius Holdings Bermuda Limited announced that 100% shares of the latter has been sold for a total consideration of $216.7 million. Tower expects to close the merger on Mar 13.
Effective upon consummation, the shareowners of Tower are expected to get 1.1330 shares of Canopius Bermuda.
Post merger, Canopius Bermuda will be renamed as Tower Group International, Ltd. The shares of the new company will be listed on the NASDAQ and will be traded under the ticker symbol of TWGP, which is same as that of the acquiring company.
The share price upon opening will witness adjustments related to conversion.
Via the merger Tower will gain access to the Bermuda platform which would provide competitive advantage to support growth opportunities in U.S. and international markets. Tower expects a combined gross premium written of $2.3 billion in 2013, taking into account business accretion from Canopius.
Taking into effect synergies from the merger, Tower’s earning per share is expected to be $2.75–$2.95 in 2013 and $3.65–$3.85 per share in 2014.
Post merger Tower’s Assumed Reinsurance business will be underwritten from the Bermuda office by staff acquired from the merger with Canopius, and supplemented by other Bermuda personnel. Other businesses will be created using the Bermuda platform.
In the U.S., the company will continue to focus on building commercial, specialty and personal lines business with continuing reinsurance support from the Bermuda based reinsurance affiliate. Tower will also continue to participate in Lloyd’s business through ownership in and expanded reinsurance relationship with Canopius. It will also continue to support other Lloyd’s syndicates.
Tower is well positioned to achieve its long term goals of transforming into a national insurance company; developing a robust platform of commercial, specialty and personal lines; expand business model to enhance profitability; improve systems, infrastructure and redesign organizational structure to support growth. It should finally achieve ROE that exceeds a target of 10–14% by 2014.
Tower currently retains a Zacks Rank #2 (Buy).
Other players from the same industry under our coverage – Nielsen Holdings N.V. ( NLSN) with Zacks Rank #1 (Strong Buy), LifeLock, Inc. ( LOCK) and Verisk Analytics, Inc. ( VRSK) both with Zacks Rank #2 (Buy) are worth considering.
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