Tower shares rebound sharply
Shares of Tower Group International Ltd soared more than eight percent yesterday after investors appeared to regain confidence that its proposed merger deal with fellow Bermuda insurer ACP Re Ltd would go through after all.
In trading on the Nasdaq Stock Echange in New York, Tower shares plunged more than 11 percent on Monday to $1.80, after the company revealed in a regulatory filing last Friday that it had asked ACP Re on June 26 to “unequivocally assure” Tower that it intended to complete the $2.50-a-share takeover agreed in May.
On June 27, ACP Re replied: “ACP Re will comply in all respects with its obligations under the parties' merger agreement. ACP Re reserves all its rights under the merger agreement, with respect to the matters referenced in your letter or otherwise.”
No additional comment from either company was published or filed by press time yesterday.
Tower had sought the assurance after what it described as oral suggestions from ACP Re that an insolvency event may have occurred under the merger agreement relating to requirements set by the Massachusetts Insurance Department in an amended order of administrative supervision on May 20.
In the letter, Tower stated: “We do not believe that any such insolvency event has occurred. Tower intends to satisfy all conditions to closing the merger applicable to Tower.”
Tower added in the filing that last Thursday, it had confirmed to the Massachusetts Insurance Department that it would immediately contribute $3 million to its Tower National subsidiary, which is domiciled in the state.
Tower's share price has plummeted over the past year after it had to strengthen reserves after high-than-expected claims and ratings downgrades followed.
Yesterday, the shares climbed 15 cents, or 8.3 percent, to close on $1.95.