January 6, 2014
HAMILTON, Bermuda--(BUSINESS WIRE)-- Tower Group International, Ltd. (NASDAQ:TWGP) (Tower) announced today that on January 3, 2014 it entered into an Agreement and Plan of Merger (Merger Agreement) with ACP Re Ltd. (ACP Re), and a wholly-owned subsidiary of ACP Re (Merger Sub), pursuant to which, subject to the satisfaction or waiver of the conditions therein, it is expected that Merger Sub will merge with and into Tower, with Tower as the surviving corporation in the merger and a wholly owned subsidiary of ACP Re. The transaction is expected to close by the summer of 2014. ACP Re is a Bermuda based reinsurance company. The controlling shareholder of ACP Re is a trust established by the founder of AmTrust Financial Services, Inc. (AmTrust), National General Holdings Corporation (NGHC) and Maiden Holdings, Ltd.
Pursuant to the terms of the Merger Agreement, at the effective time of the merger, each outstanding share of Tower's common stock, par value $0.01 per share, following the settlement of all outstanding equity awards, will be converted into the right to receive $3.00 in cash, with an aggregate value of approximately $172.1 million.
Each of the parties has made customary representations and warranties in the Merger Agreement. Tower has agreed to certain covenants and agreements, including, among others, (i) to conduct its business in the ordinary course of business, consistent with past practice, during the period between the execution of the Merger Agreement and the closing of the merger, (ii) not to solicit alternate transactions, subject to a customary "fiduciary out" provision which allows Tower under certain circumstances to provide information to and participate in discussions with third parties with respect to unsolicited alternative acquisition proposals that Tower's Board of Directors has determined, in its good faith judgment, is appropriate in furtherance of the best interests of Tower, and (iii) to call and hold a special shareholders' meeting and recommend adoption of the Merger Agreement.
Concurrently with the execution of the Merger Agreement, several subsidiaries of Tower have entered into Cut Through Reinsurance Agreements, pursuant to which, subject to receipt of necessary regulatory approvals, a subsidiary of AmTrust and a subsidiary of NGHC will reinsure Tower's new and renewal commercial lines or personal lines policies, as applicable, and have each acquired a 10-day option to reinsure on a prospective basis not less than 60% of the unearned premium reserve relating to Tower's in force commercial lines or personal lines business, as the case may be. Tower will receive a 20% ceding commission from AmTrust or NGHC on all Tower premiums that are subject to the Cut Through Reinsurance Agreements.
Concurrently with the execution of the Merger Agreement, the controlling shareholder of ACP Re has provided to Tower a guarantee for the payment of the merger consideration.
The Merger Agreement was unanimously approved by the respective Boards of Directors of ACP Re and Tower, and is conditioned, among other things, on: (i) the approval of Tower's shareholders, (ii) receipt of governmental approvals, including antitrust and insurance regulatory approvals, (iii) the absence of any law, order or injunction prohibiting the merger, (iv) the accuracy of each party's representations and warranties (subject to customary materiality qualifiers), and (v) each party's compliance with its covenants and agreements contained in the Merger Agreement. In addition, ACP Re's obligation to consummate the merger is subject to the non-occurrence of any material adverse effect on Tower, as well as the absence of any insolvency-related event affecting Tower. The transaction is also conditioned on holders of not more than 15% of Tower's common stock dissenting to the merger.
There is no financing condition to consummation of the transactions contemplated by the Merger Agreement.
The Merger Agreement provides certain termination rights for both Tower and ACP Re, and further provides that upon termination of the Merger Agreement under certain circumstances, Tower will be obligated to reimburse ACP Re for certain of its transaction expenses, subject to a cap of $2 million, and to pay ACP Re a termination fee of $8.18 million, net of any transaction expenses it has reimbursed.
The lead financial advisor to Tower on this transaction was J.P. Morgan Securities LLC. Tower also received financial advice from BofA Merrill Lynch.
Michael H. Lee, the Chairman, President and Chief Executive Officer of Tower, who beneficially owns approximately 4.2% of the issued and outstanding common stock of Tower as of January 3, 2014, has entered into a support agreement pursuant to which he has agreed to vote his shares in favor of the merger.
About ACP Re
ACP Re is a Bermuda based reinsurance company. The controlling shareholder of ACP Re is a trust established by the founder of AmTrust Financial Services, Inc., National General Holdings Corporation and Maiden Holdings, Ltd.
Tower Group International, Ltd. is a Bermuda-based global diversified insurance and reinsurance holding company and is listed on the NASDAQ Global Select Market under the symbol TWGP. Through our insurance and reinsurance subsidiaries in the U.S. and Bermuda, collectively referred to as Tower Group Companies, we deliver a broad range of commercial, personal and specialty insurance products and services in the U.S. and specialty reinsurance products globally through our distribution and underwriting partners.
For more information, visit Tower's website at http://www.twrgrpintl.com.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
This communication is not a solicitation of a proxy from any shareholder of Tower. In connection with the Merger Agreement, Tower intends to file a proxy statement with the United States Securities and Exchange Commission (SEC). Investors and shareholders are urged to read the proxy statement and other relevant materials filed with the SEC when they become available because they will contain important information about Tower, ACP Re and the proposed transaction. The proxy statement and other relevant materials (when they become available), and any other documents filed by Tower or ACP Re with the SEC, may be obtained free of charge at the SEC's website at www.sec.gov In addition, investors and shareholders may obtain free copies of the documents filed by Tower with the SEC by directing a written request to "Investor Relations," Tower Group International, Ltd., Bermuda Commercial Bank Building, 2nd Floor, 19 Par-la-Ville Road, Hamilton, HM 11, Bermuda, or by email to Bernard Kilkelly, Managing Vice President, Investor Relations (email@example.com).
The directors, executive officers and other members of management and employees of Tower may be deemed participants in the solicitation of proxies from its stockholders in favor of the transactions. Information concerning persons who may be considered participants in the solicitation of Tower's stockholders under the rules of the SEC is set forth in public filings filed by Tower with the SEC and will be set forth in the proxy statement/prospectus when it is filed with the SEC. Information concerning Tower's participants in the solicitation is contained in Tower's Proxy Statement on Schedule 14A, filed with the SEC on March 25, 2013.
Cautionary Statement Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This press release and any other written or oral statements made by or on behalf of Tower may include forward-looking statements that reflect Tower'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" and "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 to differ materially from those indicated in these statements. Please refer to Tower's filings with the SEC, including among others Tower's Annual Report on Form 10-K for the year ended December 31, 2012 and subsequent filings on Forms 10-K/A, 10-Q and 10-Q/A, for a description of the important factors that could cause the actual results of Tower to differ materially from those indicated in these statements. Forward-looking statements speak only as of the date on which they are made, and Tower undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
The following important factors are among those that could affect the actual outcome of other future events:
Additional risk factors that may cause outcomes that differ from our expectations or projections are described in various documents filed by Tower with the Securities and Exchange Commission, such as current reports on Form 8-K, and regular reports on Forms 10-K and 10-Q, particularly in "Item 1A, Risk Factors."
Tower Group International, Ltd.
Bernie Kilkelly, 212-655-8943
Managing Vice President, Investor Relations
Jamie Tully/David Millar, 212-687-8080
Source: Tower Group International, Ltd.
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