Industries Insurance

Markel to acquire Alterra in $3.13 billion deal

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Richmond-based Markel Corp. plans to acquire specialty insurance and reinsurance company Alterra Capital Holdings Ltd. in a deal worth $3.13 billion.

Steven A. Markel, Markel’s vice chairman, called Alterra, which is based in Hamilton, Bermuda, “an impressive company with proven worldwide underwriting operations in product lines that we believe are highly complementary to Markel’s existing lines.”

He said Alterra’s reinsurance and large-account insurance portfolios would diversify and strengthen Markel’s specialty insurance business. Reinsurance involves part of an insurer’s risk being assumed by other companies in return for a share of the premiums. Specialty insurance is the segment of the insurance industry dealing primarily in difficult or unusual risks.

Markel’s offer for Alterra is worth about $31 per share in stock and cash. Under the terms of the definitive merger agreement, each Alterra common share will be converted into the right to receive 0.04315 Markel common shares (with cash paid for fractional shares) plus a cash payment of $10.

After the merger, Markel’s existing shareholders will own approximately 69 percent of the combined company on a fully diluted basis, with Alterra’s shareholders owning about 31 percent.
Pending shareholder and regulatory approvals, the deal is expected to close in the first half of 2013.

Upon closing, two directors designated by Alterra’s current board will be added to the Markel’s board of directors.

W. Marston (Marty) Becker, the president and CEO of Alterra, is expected to leave the company following the close of the transaction.

“The combination of Alterra with Markel will create an incredibly strong company in global specialty insurance and investments,” he said in statement. “The demonstrated track record of underwriting discipline in niche market segments by both companies, along with Markel’s proven asset management strengths, should benefit all stakeholders.”

Following the merger, Markel is expected to have annual gross premiums of about $4.4 billion and to have approximately $6 billion in equity .

The combined company’s business is expected to be about 67 percent insurance and 33 percent reinsurance.

The combined entity’s investment portfolio will be more than $16 billion.

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