IPC Holdings Ltd. shareholders are set to decide on the future of the company tomorrow when they vote on Max Capital Group Ltd.'s proposed merger with IPC.

IPC and Max announced in March that the two companies would combine to form Max Capital Group, run by president and CEO Marston Becker, but since then Validus Holdings Ltd. has come in with a hostile bid to take over IPC.

The latest development has seen Max and Validus step up their war of words, with Max hitting back at claims by Validus that it can deliver on its offer to IPC shareholders on time, saying it has no "clear path" to close a deal with IPC.

Meanwhile IPC itself has claimed that proxy adviser RiskMetrics Group's (RMG) recommendation against the IPC/Max amalgamation was "flawed and misleading" due to mathematical and analytical mistakes.

The current deals on the table for IPC's shareholders include an offer of $2.50 per share for completion of the Max merger and Validus's offer of $3.75 per share plus 1.1234 Validus common voting shares.

In a statement released yesterday, Max said Validus had "repeatedly and inappropriately" stated it had a clear path to conclude a transaction with IPC, but added its rival had conceded for the first time in a regulatory filing that there was no assurance the Bermuda Supreme Court would allow Validus to call an IPC shareholder meeting on a scheme of arrangement.

"This accurate statement contrasts with numerous misleading statements made by Validus in the past, suggesting that there was a 'clear path' for its scheme to succeed," read the statement from Max.

"For example, on May 29, Validus proclaimed: 'Validus is pleased that, if the Max deal is voted down, it will have a clear path to pursue a scheme of arrangement.

"This statement was misleading, and Validus's latest SEC filings have removed references to a 'clear path'."

Max said Validus had also admitted that without the support of IPC's board of directors, it could not complete its exchange offer on time, having previously repeated its claim it could close on its acquisition of IPC as early as June 26, with IPC's board of directors determining its position after this week's vote.

Mr. Becker said that Validus's statements this week confirmed its rival's proposals were not viable and could not be implemented in a current time frame.

"In addition to being fraught with risk and uncertainty, we continue to believe that Validus's latest revised bid, like each of the others before it, fails to reach the level of financial and strategic benefits afforded to IPC and Max shareholders by the IPC-Max merger," he said.

Mr. Becker added that the IPC/Max deal offered more book value per share to IPC shareholders as well as a significant cash part, with the new company providing them with superior long-term growth potential reflecting its diversification, capital efficiency and profitable growth.

In addition, Max reckons Validus is offering IPC shareholders an overvalued currency and highly correlated risk, magnified by reducing capital levels in the company, in contrast to the IPC/Max merger, which it believes provides current and long-term strategic value and produces more stable returns.

It added that investors should reject any attempts by Validus to "distract and mislead" them into thinking it can use its overvalued currency to acquire IPC.

IPC, in the meantime, has said, once corrected, RMG's own framework shows that the Max deal was superior to the Validus offer, adding that the initial calculations against the Max proposal were flawed, due to omitting IPC's book value growth and ignoring incremental returns from up to $400 million in excess capital.

Validus also put out a statement yesterday, dismissing Max and IPC's "misleading characterisations" about the timing of a Validus closing, maintaining it has a clear path to clinching an agreement with IPC shareholders, either via an exchange offer, an amalgamation agreement or a scheme of arrangement.

Additionally, it labelled IPC's comments on the RiskMetrics report were part of a continuing attempt to divert IPC shareholders' attention from the fact Validus' offer provided better market value compared to the proposed Max amalgamation, including a 12.5 percent premium based on the closing prices of the two companies on Tuesday.

Furthermore, Validus claimed that statements by IPC and Max that dividends provided under the Max transaction should be added to the value of the deal were inconsistent with the basic principles of corporate finance and would just return IPC shareholders their own money, as opposed to the Validus $3.75 cash offer, which offers them real value.

It concluded IPC's argument that RiskMetrics' analysis did not include projected book value growth for IPC was baseless and it was "wholly speculative" where the combined IPC/Max company would derive future profits from remaining excess capital, given Max's recent record of underwriting losses.

TIME LINE

March 2: IPC Holdings Ltd. and Max Capital Group Ltd. announce they are set to merge and form Max Capital Group to be run by president and CEO Marston Becker

March 31: Validus Holdings Ltd. makes a hostile bid for IPC, offering $1.7 billion in stock or 1.2037 of its shares for each share of IPC.

April 7: IPC's board of directors reaffirms its commitment to the merger after considering Validus's rival offer.

April 8: Validus announces its intention to canvas IPC shareholders in a bid to persuade them to vote against the Max deal.

April 16: Validus convenes a special meeting of shareholders to try and win backing for its plan to take over IPC.

April 28: Validus files legal proceedings in the Supreme Court of Bermuda against IPC and Max that challenge the $50 million termination fee and "no-talk" provisions contained in the amalgamation plan.

May 3: IPC's board urges the company's shareholders to reject the hostile takeover attempt by Validus in favour of a merger with Max.

May 7: Decision day for shareholders on the planned merger of Max and IPC is set for June 12.

May 12: Validus launches its share exchange offer, which would see IPC shareholders receive 1.2037 Validus shares for each IPC share.

May 14: IPC and Max clear the regulatory hurdles needed to go ahead with their amalgamation on the same day that the Bermuda Supreme Court turns down Validus' request for an expedited trial after the reinsurer filed a lawsuit against IPC and Max, challenging the $50 million termination fee and "no-talk" provision contained in their merger agreement

May 18: Validus makes a new offer to IPC shareholders of $30.14 per share, including $3 of cash and 1.1234 Validus shares for each IPC share, only for it to be turned down by IPC's board three days later.

May 31: The Bermuda Supreme Court dismisses Validus's application to convene a meeting of IPC shareholders in connection with its attempted hostile takeover of the company

June 2: IPC shareholders are recommended to vote in favour of the company's amalgamation with Max by two proxy advisory firms - Glass Lewis & Co. and Proxy Governance Inc. A day later RiskMetrics Group recommends they vote against the merger.

June 4: IPC shareholders are offered a cash enticement of $2.50 per share to vote in favour of the planned deal with Max.

June 8: Validus ups the ante in the race to acquire IPC by increasing its offer to IPC shareholders by 75 cents to $3.75 in cash for each IPC common share, as well as 1.1234 Validus voting common shares.

ON THE TABLE

IPC-Max merger - $2.50 per share for IPC shareholders (paid in two dividends - $1.50 per share three days after Friday's vote, and $1 per share following the closing of the transaction) and a cash dividend of $1 per share for Max shareholders for each IPC share following the closing of the transaction

Validus offer - $3.75 per share for IPC shareholders plus 1.1234 Validus voting common shares