Insurer XL Group to acquire rival Catlin for $2.5 bn: report

XL Group Plc, a New York-listed insurance firm, is close to acquiring London-listed rival Catlin Group Plc, insurer of Lloyd's of London, for approximately $2.5 billion (£1.6 billion), aiming to create a global leader in insurance and reinsurance market, The Sunday Times reported yesterday quoting a source close to XL.

Last week, Catlin revealed that XL had approached it with a cash-and-stock takeover offer. XL's proposal comprised a cash consideration of 410 pence and 0.130 shares of XL, valuing each Catlin share at 699 pence.

The offer represented a 20-per cent premium to Catlin's share price, based on the closing price of XL stock of $35.01on 16 December, before the news broke out.

Shares in Catlin ended at 648 pence on Friday in London while XL stock closed at $33.54 in New York.

Bermuda-based Catlin is a global specialty property/casualty insurance and reinsurance company founded by Stephen Catlin and a colleague three decades ago. The group operates six underwriting hubs in London, Bermuda, US, Asia Pacific, Europe and Canada writing more than 30 lines of business and has more than 55 offices worldwide.

Catlin owns the largest syndicate at Lloyd's of London, the world's leading specialist insurance market, which has business from over 200 countries and territories worldwide. Catlin's gross written premiums were $5.3 billion last year. The firm has around 2,400 employees.

The group's shares are listed on the London Stock Exchange and it is a member of FTSE 250 Index.

Hinting at a possible tie-up, last week Catlin said a combination of XL and Catlin would create a world leader in specialty and property catastrophe markets and one of the top 10 players in the global reinsurance market.

Stephen currently holds around 1.7 per cent stake in Catlin, which is worth about £44 million. He has been steadily offloading his stake in the company since 1990.

Unlike many of his rivals, Stephen was unscathed by the Lloyd's losses caused by the 1987 and 1990 storms and the Piper Alpha oil rig disaster in North Sea in 1988, according to the paper.

Catlin had also said that it is in talks to sell its interest in Box Innovation Group Ltd, a car insurer that fits black boxes to cars and any surplus capital generated would be in addition to the indicative terms of the offer.

Dublin, Ireland-headquartered XL is a global insurance and reinsurance company having executive offices in Hamilton, Bermuda and Stamford (Connecticut) in the US. The company has about 60 offices spread across Africa, Asia, Australia, Europe and the Americas employing around 4,000 people.

XL's total assets stand at approximately $46 billion and its 2013 revenue was $7.5 billion.

According to the newspaper, the two insurers have now finalised a deal. However, it is believed that a formal announcement of the acquisition may not come until the New Year. Observers believe a final offer for Catlin would be very close to the terms announced last week to the market.