Bidding War for Capital Re Corp. Heats Up Between Ace Ltd. and XL Capital Ltd.

Strategic Insights -

The bidding war for Capital Re Corp. is intensifying between Ace Ltd. and XL Capital Ltd. as both companies revise their offers to $13 a share. The potential acquisition has been taking shape since May, when Ace initially reached an agreement with Capital Re to purchase the company for $10 a share. However, XL jumped into the fray two weeks ago with an offer of $12.50 a share, prompting Capital Re to withdraw its recommendation to stockholders and opt for XL's offer. In response, Ace revised its offer to match XL's, and Capital Re is expected to make a decision by the close of business Tuesday.

Key Takeaways:

  • Ace Ltd. has increased its offer for Capital Re Corp. to $13 a share, matching XL Capital Ltd.'s revised offer.
  • The potential acquisition has been ongoing since May, when Ace initially agreed to purchase Capital Re for $10 a share.
  • XL Capital Ltd. intervened two weeks ago with an offer of $12.50 a share, prompting Capital Re to reconsider its recommendation to stockholders.
  • Adam Klauber, a managing director at Cochran, Caronia & Co., believes that Capital Re is an attractive platform for both companies and that the balance is tilted slightly towards Ace's offer due to the joint venture and existing ownership.
  • The offers are worth approximately $462.8 million based on Capital Re's 35.6 million common shares outstanding.
  • Ace's offer includes a combination of shares and cash, while XL's offer is all cash.
  • Capital Re shareholders would not have to pay taxes on the shares if Ace's offer is accepted.

Statistics:

  • Capital Re Corp. has 35.6 million common shares outstanding.
  • The total value of the offers is approximately $462.8 million ($13 a share \* 35.6 million shares).
  • Ace Ltd. has already owns 12% of Capital Re Corp.
  • XL Capital Ltd. acquired Nac Re for $1.01 billion earlier this year.
  • Ace Ltd. purchased Cigna Corp.'s property/casualty operations for $3.45 billion in 1999.

Sources:

  • Capital Re Corp. press release, October 1999.
  • Ace Ltd. press release, October 1999.
  • XL Capital Ltd. press release, October 1999.
  • Industry analysts, including Adam Klauber from Cochran, Caronia & Co.
  • Theresa Miller, senior associate editor at BestWeek.