Enstar makes bid to buy Arch-backed Watford Re

Bermuda-based re/insurer Enstar has revealed that it has made an offer to buy Arch Capital-backed reinsurer  Watford Re for a per share price of $31.00.

On September 30, Enstar sent a letter to Watford Re’s board proposing to acquire 100 percent of the ordinary share capital of Watford.

Enstar currently holds a 9.1 percent stake in Watford Holdings, after recently increasing its shareholding in the first quarter of 2020, reflecting its view that the "current share price undervalues the true economic value of Watford".

Enstar has proposed to pay $31.00 per ordinary share at closing, which represents a premium to current market price of 35.1 percent.

In a US Securities and Exchange Commission filing, the re/insurer said its proposal is based on due diligence and analysis conducted based on publicly available information.

Enstar noted that it is aware that Watford's board of directors have hired Morgan Stanley to help evaluate strategic options for the company, adding that it would be "pleased to engage with Watford and its Board to help provide a solution".

The acquiring entity will be a wholly-owned direct or indirect subsidiary of Enstar Group. Enstar said it is "willing to dedicate the necessary resources, including an experienced set of M&A professionals, to complete our due diligence and the negotiation of definitive documentation expeditiously".

Earlier in May, Watford Re's shareholder Capital Returns Management had written to the reinsurer's chairman Walter Harris to conduct a "strategic review" and consider selling itself after generating "extremely disappointing results" for its shareholders.