Tower Group, Inc. (�Tower�; NASDAQ: TWGP) and Specialty
Underwriters' Alliance, Inc. (�SUA�; NASDAQ: SUAI) have announced
today that they have entered into a definitive agreement for the
acquisition of SUA by Tower in a transaction valued at
approximately $107 million. Under the terms of that agreement, SUA
shareholders would receive Tower common stock equal to $6.72 per
SUA share based on Friday�s closing stock price for Tower of
$24.00.
Transaction Highlights:
- Financially compelling to
Tower and SUA stockholders
-- SUA is valued in the transaction at an 87% premium to SUA�s
average closing price over the past 30 trading days. � -- On a pro
forma basis as of March 31, 2009, Tower�s stockholders� equity
increases by 13% from $786.9 million to approximately $890 million.
The transaction is expected to be accretive to Tower�s book value
per share immediately at closing. � -- After giving effect to the
transaction, Tower projects its 2010 Diluted EPS will be in a range
between $3.50 and $3.70 which accounts for the additional shares
expected to be issued.
- Strengthens specialty
business segment
-- SUA will be able to better leverage its strong distribution
network and expand its business opportunities by accessing Tower�s
A- rating by A.M. Best Company. � -- Tower will be able to create a
separate and distinct underwriting and operational infrastructure
dedicated to specialty business which would take advantage of the
growth opportunities in this area. � -- The combination of Tower�s
and SUA�s specialty businesses creates a much larger, efficient,
more scalable and profitable specialty business with strong growth
potential.
- Establishes a Midwest
regional office to support continued geographical
expansion
-- Tower�s brokerage insurance business will be expanded by
utilizing SUA�s underwriting staff to offer products to wholesale
and retail agents in the Midwest where Tower does not have an
operating presence.
Under the terms of the agreement, SUA shareholders, including
Class B shareholders, will receive 0.28 shares of Tower common
stock for each share of SUA common stock or SUA class B stock. The
exchange ratio is subject to adjustment based on Tower�s volume
weighted average price per share during a 15 day trading window
prior to closing, and will be fixed at 0.28 if the average price of
Tower stock during such period is equal to or greater than $23.25
and equal to or less than $27.75. If the average stock price during
such period is greater than $27.75, the exchange ratio will be
adjusted downward to provide SUA shareholders with a fixed value
per share of $7.77. If the average stock price during such period
is less than $23.25 but equal to or more than $20.00, the exchange
ratio will be adjusted upward to provide SUA shareholders with a
fixed value per share of $6.51. However, if Tower�s average stock
price during such period falls below $20.00, the exchange ratio
will be fixed at 0.3255, and SUA will have the right, for a limited
period, to terminate the agreement, unless Tower elects to add
Tower shares to provide SUA shareholders with a value per share of
$6.51.
The boards of directors of Tower and SUA have approved the
transaction, and the board of directors of SUA has recommended the
transaction to its shareholders. The transaction is expected to
close approximately at year-end 2009, subject to customary closing
conditions, including the approval by SUA shareholders, as well as
certain regulatory approvals.
Michael H. Lee, Chairman and CEO of Tower, stated, �Acquiring
SUA enables us to raise additional capital cost effectively to
support our growth initiatives. It also significantly enhances our
profile in the specialty business segment, an area in which we are
seeing very strong opportunities for growth. By fully leveraging
the operating platform and distribution relationships that SUA has
developed, we are confident in our ability to further build on
CastlePoint�s specialty business. We particularly value the
experienced people at SUA who will help us in executing our plans
in the specialty business segment.�
Courtney Smith, SUA�s President and CEO, stated, �We are pleased
to join forces with Tower, which has a strong track record in
acquisitions and providing meaningful value to shareholders. After
a careful review of our strategic alternatives, our board has
concluded that this transaction provides our shareholders with the
best opportunity to enhance shareholders� value. In addition, our
affiliation with Tower will allow us to improve our profitability
and take advantage of the current market opportunities by accessing
Tower�s A- rating by A.M. Best Company and strong
capitalization.�
Tower retained Debevoise & Plimpton LLP as its legal
advisor. FBR Capital Markets & Co. acted as SUA�s exclusive
financial advisor, and Stroock & Stroock & Lavan LLP acted
as SUA�s independent legal advisor.
Additional Highlights and Disclosures:
Tower 2010 Guidance
For 2010, including the effects of the SUA transaction, Tower
projects its diluted earnings per share to be in a range between
$3.50 and $3.70 per diluted share.
Investor Call and Presentation
Tower and SUA will host a joint conference call on Tuesday, June
23, 2009 at 10:00 A.M. (Eastern Time) to discuss the transaction.
The call-in number is: 877-795-3649; international 719-325-4788.
This conference call will also be broadcast live over the Internet.
To access the presentation and a listen-only webcast over the
Internet, please visit the Investor Information section of Tower�s
website, www.twrgrp.com.
Please access the website at least 15 minutes prior to the call
to register and to download any necessary audio software. If you
are unable to participate during the live conference call, a
listen-only webcast will be archived in the Investor Information
section of both companies� websites.
About Tower
Tower Group, Inc. offers property and casualty insurance
products and services through its operating subsidiaries. Its
insurance company subsidiaries in the U.S. offer insurance products
to individuals and small to medium-sized businesses through its
network of retail and wholesale agents and specialty business
through program underwriting agents. Tower also offers reinsurance
solutions to small insurance companies through its Bermuda based
reinsurer and U.S. insurance companies. Tower's insurance services
subsidiaries provide underwriting, claims and reinsurance brokerage
services to other insurance companies.
About SUA
Specialty Underwriters' Alliance, Inc., through its subsidiary
SUA Insurance Company, is a specialty property and casualty
insurance company providing commercial insurance products through
exclusive wholesale Partner Agents that serve niche groups of
insureds. These targeted customers require highly specialized
knowledge due to their unique risk characteristics. Examples
include tow trucks, professional employer organizations, public
entities, and contractors. SUA's innovative approach provides
products and claims handling, allowing the Partner Agent to focus
on distribution and customer relationships.
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward-looking statements. This press release or
any other written or oral statements made by or on behalf of Tower
or SUA may include forward-looking statements that reflect Tower�s
or SUA�s current views with respect to future events and financial
performance. All statements other than statements of historical
fact included in this press release are forward-looking statements.
Forward-looking statements can generally be identified by the use
of forward-looking terminology such as �may,� �will,� �plan,�
�expect,� �project,� �intend,� �estimate,� �anticipate,� �believe�
or �continue� or their negative or variations or similar
terminology. All forward-looking statements address matters that
involve risks and uncertainties. Accordingly, there are or will be
important factors that could cause the actual results of Tower, SUA
or the combined company to differ materially from those indicated
in these statements. The following factors, among others, could
cause or contribute to such material differences: the ability to
obtain governmental approvals or rulings on or regarding the
transaction on the proposed terms and schedule; the failure of the
shareholders of SUA to approve the merger; the failure to satisfy
the closing conditions to the transaction; the risk that the
businesses will not be integrated successfully or that such
integration may be more difficult, time-consuming or costly than
expected; the risk that the revenue opportunities, cost savings and
other anticipated synergies from the merger may not be fully
realized or may take longer to realize than expected; disruption
from the merger making it difficult to maintain relationships with
customers, employees, brokers and managing general agents; the risk
that the U.S. tax authorities may view the tax treatment of the
merger and/or the other transactions contemplated by the merger
agreement differently from Tower�s and SUA�s tax advisors; costs
relating to the transaction; ineffectiveness or obsolescence of the
business strategy due to changes in current or future market
conditions; increased competition on the basis of pricing,
capacity, coverage terms or other factors; greater frequency or
severity of claims and loss activity, including as a result of
natural or man-made catastrophic events, than the underwriting,
reserving or investment practices of Tower and SUA anticipate based
on historical experience or industry data; the ability to obtain
necessary governmental licenses; the ability to hire and retain
executive officers and other key personnel; the effects of acts of
terrorism or war; developments in the world's financial and capital
markets that adversely affect the performance of Tower�s or SUA's
investments; changes in regulations or laws applicable to Tower or
SUA or their respective subsidiaries, brokers or customers,
including tax laws in the United States; acceptance of products and
services, including new products and services; changes in the
availability, cost or quality of reinsurance and failure of Tower�s
or SUA�s reinsurers to pay claims timely or at all; decreased
demand for Tower or SUA�s insurance or reinsurance products; the
effects of mergers, acquisitions and divestitures in the insurance
and reinsurance sectors; changes in rating agency policies or
practices; changes in legal theories of liability under Tower�s or
SUA�s insurance policies or the policies that it reinsures; changes
in accounting policies or practices; changes in general economic
conditions, including inflation; and other events and factors
disclosed previously and from time to time in Tower�s or SUA�s
filings with the SEC, including Tower�s and SUA�s Annual Reports on
Form 10-K for the year ended December 31, 2008. Forward-looking
statements speak only as of the date on which they are made, and
neither Tower nor SUA undertakes any obligation to update publicly
or revise any forward-looking statement, whether as a result of new
information, future developments or otherwise.
Additional Information
The proposed merger will be submitted to shareholders of SUA for
their consideration. In connection with the proposed merger, Tower
and SUA will file with the Securities and Exchange Commission (the
�SEC�) a Registration Statement on Form S-4, a proxy
statement/prospectus and other relevant documents. Shareholders of
SUA are urged to read the registration statement, the proxy
statement/prospectus and all other documents which will be filed
with the SEC regarding the proposed merger when they become
available because they will contain important information.
Shareholders will be able to obtain a free copy of the registration
statement, proxy statement/prospectus (when available), as well as
other filings containing information about Tower and SUA, without
charge, at the SEC�s Internet site (www.sec.gov). Copies of the
registration statement, proxy statement/prospectus and the filings
with the Securities and Exchange Commission that will be
incorporated by reference in the proxy statement/prospectus can
also be obtained, without charge, by accessing the companies�
websites: http://www.twrgrp.com/ or
http://www.suainsurance.com/
SUA, its directors and executive officers and other persons may
be deemed to be participants in the solicitations of proxies from
the shareholders of SUA in respect of the proposed merger.
Information regarding SUA�s directors and executive officers is
available in its proxy statement filed with the Securities and
Exchange Commission on April 1, 2009. Additional information
regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security
holdings or otherwise, will be contained in the proxy
statement/prospectus when it becomes available.
This press release shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of such jurisdiction. No offering of securities
shall be made except by means of a proxy statement/prospectus
meeting the requirements of Section 10 of the Securities Act of
1933, as amended.
For more information visit Tower's website
athttp://www.twrgrp.com/.
Or SUA's website athttp://www.suainsurance.com/.
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