Enstar buys back $879m Hillhouse stake in 'compelling' deal

Bermuda-based re/insurer and legacy specialist  Enstar Group is set to buy back more than 3.7 million of its own shares currently held by Chinese shareholder Hillhouse Capital Management in a deal totaling $879.3 million in aggregate at a discount to book value.

Meanwhile, Enstar’s wholly owned subsidiary has agreed to acquire a Hillhouse affiliate’s entire 27.7 percent interest in Enhanzed Reinsurance for an estimated price of $228.7 million.

Dominic Silvester, the company's chief executive officer, views these transactions as a "compelling opportunity for Enstar to deploy capital strategically to repurchase shares at a discount to book value and to acquire control of the Enhanzed Re platform on terms expected to be accretive to Enstar."

The re/insurer has entered into an agreement to repurchase 3,749,400 ordinary Enstar shares for $234.52 per share. The shares represent the Hillhouse funds’ entire interest in Enstar, which constitutes 16.9 percent of total ordinary shares and 9.4 percent of voting ordinary shares.

The purchase price for Enhanzed Re is based on 90 percent of its estimated total shareholders’ equity as of June 30, 2021. The price will be adjusted to reflect Enhanzed Re’s balance sheet at the time of the sale.

Once the Enhanzed Re shares have been acquired, Enstar’s equity interest in the Bermuda-based reinsurer will increase from 47.4 percent to 75.1 percent. Joint venture partner Allianz SE will continue to own the remaining 24.9 percent.

The Hillhouse transaction is expected to close on or about July 21, 2021, subject to satisfaction of customary closing conditions. The Enhanzed Re deal is subject to satisfaction of customary conditions, including approval by the Bermuda Monetary Authority, and is expected to occur by the fourth quarter of 2021.

Enstar will finance the acquisitions with cash and liquidity available under its revolving credit facility. Enstar’s previously announced share buyback programme has been terminated.

Silvester stated that following completion of the share repurchase and the acquisition of Enhanzed Re, " Enstar will maintain a strong capital and liquidity position, allowing us to continue to pursue future run-off transactions. In 2021 we have already completed a record amount of transactions in terms of size, and we continue to see a healthy legacy pipeline.”

The Hillhouse funds originally acquired Enstar shares in 2016 from Goldman Sachs, acquiring additional shares in an exchange transaction with Enstar in 2018.

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