sued by a shareholder over the proposed merger of the two companies.

Mid Ocean shareholder Harbor Finance Partners has filed suit in the New York State Supreme Court against the executives and is seeking class-action status.

Harbor Finance claims Exel's friendly takeover of Mid Ocean for $2.1 billion in stock undervalues the company and denies shareholders "their right to share proportionately in the true value of Mid Ocean's valuable assets.'' Mid Ocean treasurer and secretary John Wadson said: "This kind of action, I understand, is not unexpected and unusual in these circumstances.'' Exel, which already holds 9.7 million shares or 27 percent of Mid Ocean, will be the holding company for the combined reinsurance operations which will operate as X.L. Mid Ocean Reinsurance Co. Ltd. Exel was a founding shareholder of Mid Ocean five years ago.

The purchase values Mid Ocean at about $2.9 billion, or about 12.5 times expected earnings, according to Bloomberg business news.

The joining of the two Bermuda-based reinsurers will create a powerhouse with $8 billion in market capital, making it one of the 20 largest US-listed property-casualty insurance companies.

Exel will issue about 27 million shares to buy the remainder of Mid Ocean. The company will also repurchase $500 million of its shares, either prior to or after completion of the merger.

The merger will involve Exel swapping 1.0215 of its shares, or $72.70 at last Friday's closing price, for each Mid Ocean share the company doesn't already own.