IPC Holdings Ltd. shareholders have been recommended to vote in favour of the company's merger with Max Capital Group Ltd. by two proxy advisory firms.

Glass Lewis & Co. and Proxy Governance Inc. have each recommended that IPC shareholders vote on the white proxy card for all the proposals associated with IPC's proposed amalgamation with Max.

Meanwhile IPC revealed it has sent a letter to shareholders to highlight the opportunities and benefits of the deal and to clarify some of the "misleading" public statements that it claimed rival bidder Validus had made.

Kenneth Hammond, chairman of IPC, said: "The Max transaction is the result of a careful and thorough process conducted by the IPC board with the goal of delivering superior value to IPC shareholders.

"The combination meets all of the IPC board's key criteria for enhancing shareholder value: greater scale and scope, diversification into non-correlated risks, preservation of the value of IPC's existing franchise and increased management depth." Glass Lewis said it believed the proposed merger between IPC and Max offered "compelling strategic benefits" for the company and its shareholders.

"In our view, the proposed merger will allow shareholders to participate in a larger entity with an expanded capital base," it said.

"Notably, the combination with Max is expected to diversify the company's operations and earning base, thereby reducing risk and earnings volatility. Moreover, based on the adviser's fairness opinion, we believe the financial terms of the transaction are favourable to the company and its shareholders."

Proxy Governance's report, also dated June 1, 2009, said: "Given the strong case the company (IPC) has made for the upside potential — through diversification of risk, greater investor receptivity to the business model, and lower risk-based capital requirements for the same catastrophe business — as well as the extensive strategic transactions process guided by the strategic goals the board outlined, we believe shareholders will be better served by supporting the proposed transaction with Max."