Island reinsurers Third Point and Sirius to merge
Bermuda reinsurers Third Point Re and Sirius Group have agreed to merge in a deal that will form a $3.3 billion combined company.
Siddhartha Sankaran, the former chief financial officer of American International Group who was recently named non-executive chairman of Third Point Re's board, will lead the new group, which will be renamed SiriusPoint. Kip Oberting, Sirius's chief executive, will step down from his role.
Dan Malloy, Third Point Re's current CEO, will remain a senior underwriting executive of SiriusPoint following the closing.
Billionaire hedge fund manager Dan Loeb, who founded Third Point, said: “This transaction fulfills our vision to move Third Point Re up the quality curve by adding diversified insurance lines to our existing business, thus improving returns on capital and reducing insurance volatility, expanding our investment strategy from a single manager model to reduce investment volatility, and creating critical mass to support both internal growth and future acquisitions.
“I am confident that this transaction will benefit both customers and shareholders of Third Point Re and Sirius.”
Based on the closing price of Third Point Re stock on August 5, the transaction is valued at approximately $788 million.
As part of the cash-and-stock deal, Mr Loeb, who manages Third Point Re's investments and is the company's largest individual shareholder, has agreed to buy $50 million worth of shares in the combined entity when the deal closes.
Mr Sankaran said: “We are excited to create a powerful new entity that focuses on underwriting first, but strives for excellence in its investment results.
“This transaction further strengthens our reinsurance operations and positions us to enter lines of business with higher risk-adjusted returns to achieve underwriting profitability.
“Combining with Sirius Group accelerates our continuing objective to deliver consistently strong book value per share growth over the long-term. Our new scale and global platform, diverse franchise, and enhanced financial profile will enable us to provide tremendous value to clients, brokers, and shareholders.
“I look forward to working with Sirius Group's terrific and dedicated team.”
Steven Fass, Third Point Re's former lead independent director, will join the company as vice-chairman. Mr Fass is also a former CEO of Sirius Group.
Under the terms of the deal, Sirius shareholders will have several options. They can receive $9.50 per share, or 0.743 of Third Point Re shares, and a contingent value right which in two years will guarantee them equity and cash at a minimum of $13.73 per share.
China Minsheng Investment Group, which is Sirius's majority shareholder, has opted for a third option.
The Shanghai-based investment group will receive $100 million in cash and approximately 58 million Third Point Re shares, as well as a portion of series A preference shares, warrants and other securities.
The agreement also gives Third Point Re shareholders protection from up to $100 million of net incremental Covid-19 related losses at Sirius that are incurred, in certain cases, for up to three years following the closing of the deal.
The agreement has been unanimously approved by both companies' boards of directors and is subject to approval by shareholders and regulators.
Sirius Group's majority shareholder, CM Bermuda Ltd, and its parent company, CMIG International Holding Pte. Ltd., have already entered into a binding agreement to vote in favour of the merger transaction, as has Mr Loeb.
Meyer “Sandy” Frucher, non-executive chairman of Sirius Group, said: “This strategic business combination is the result of a lot of hard work and the collaborative efforts of the Sirius Group Board, management team and CMIH and is a win-win for both Sirius Group and Third Point Re.
“I would especially like to acknowledge and thank Kip Oberting and Gene Boxer for their dedication and tireless efforts to ensure the successful resolution and conclusion of the firm's strategic review process.”