Validus Holdings Ltd. says it will canvass shareholders of IPC to try to persuade them to vote against the company's proposed merger with Max Capital.

In a statement released last night, Validus chief executive officer Ed Noonan said he was "extremely disappointed" that IPC's board of directors on Tuesday opted to reaffirm the Max merger deal rather than accept a rival bid from Validus.

IPC and Max announced their amalgamation plans in early March, but Validus aimed to derail that deal by launching its own $1.68 billion all-share bid for IPC.

"We are extremely disappointed that IPC's Board of Directors has rejected our proposal in favour of an obviously inferior alternative," Mr. Noonan said.

"We continue to believe that our proposed transaction represents a superior proposal for IPC's shareholders and is the best way to maximise value for IPC.

"While we would have preferred to work cooperatively with IPC, we remain fully committed to our proposal and expect to use all available means to complete our transaction. We encourage IPC shareholders to express their support for our proposal."

In a letter sent to IPC chairman Kenneth Hammond yesterday, Mr. Noonan said Validus had retained Georgeson as its proxy solicitor and intended to make a filing with the US Securities and Exchange Commission detailing why it believes IPC shareholders should vote against the Max merger.

"If, as we expect, IPC's shareholders vote down the Max takeover, you will be unencumbered by the restrictive Amalgamation Agreement and free to execute the Validus Agreement," the letter continues.

The letter also reveals that Validus — in its capacity as a shareholder of IPC — has started legal action to object to "the punitive nature of the $50 million Max Termination Fee". The fee is payable if the directors of either IPC or Max decide to pull out of their deal, under the terms of the amalgamation agreement.

"The termination fee is an unenforceable penalty under Bermuda law and we are commencing litigation to reduce this penalty," the letter states "If successful, we will permit IPC to pay the amount by which such penalty is reduced as a dividend to IPC shareholders, so that IPC shareholders — and not Max or Validus shareholders — will share in the value obtained."

Last night's statement was the latest twist in the drama involving the trio of Island companies that has been dubbed "The Bermuda Triangle" by one international publication.