Arch beats Enstar's offer to acquire Watford in $622m all-cash deal

Re/insurer Arch Capital Group has acquired Watford Holdings in an all-cash deal valued at approximately $622 million, slightly higher than the initial offer proposed by  Enstar in its latest bid.

The announcement follows Enstar's bid to acquire the company for a per share price of $31.00. On September 30, Enstar sent a letter to Watford Re’s board proposing a "mutually beneficial transaction that provides a fair price to Watford’s shareholders".

Arch Capital has agreed to acquire all the common shares of Watford for a per share price of $31.10. The transaction will be funded through cash from Arch’s balance sheet. Arch will retain the flexibility to bring in additional investment partners as co-investors in the transaction.

The consideration represents a premium of approximately 74 percent to Watford’s unaffected closing common share price on September 8, 2020. Watford's 8.5 percent cumulative redeemable preference shares will remain outstanding and will be entitled to the same dividend and other rights.

Following the deal, Watford will continue to operate as a standalone business and remain consolidated within Arch’s financials. The transaction is expected to complete in the first quarter of 2021.

“This represents a clear path forward for Watford, while also delivering an attractive premium to shareholders in a transaction with a high degree of certainty to close,” said Jon Levy, Watford’s president and chief executive officer.

“We believe that Watford will be better positioned as a standalone business within Arch to execute its strategic priorities and growth plans. Importantly, we expect a seamless transition for our clients, trading partners and policyholders, who we think will benefit from Watford becoming part of a larger organisation with greater resources.”

Marc Grandisson, president and chief executive officer of Arch, said:“Since we launched Watford in 2014, the company has been a valued part of the Arch story and we are pleased to deepen our existing strategic and financial investment. Our longstanding contractual partnership with and financial consolidation of Watford expedited the due diligence process and should give all stakeholders confidence in our ability to close this transaction quickly. Watford’s policyholders and trading partners will benefit from the continued underwriting strength and service they have come to expect from Watford and Arch.”

Goldman Sachs is acting as financial advisor to Arch, and Cahill Gordon & Reindel is serving as the Company’s legal advisor. Morgan Stanley is acting as financial advisor to Watford, and Clifford Chance US is serving as Watford’s legal advisor.