8-KMaterial AgreementsExhibits & Filings

ARCH CAPITAL GROUP LTD. 8-K Report, Material Agreement (Oct 14, 2020)

Filed October 14, 2020For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) announced on October 14, 2020, its entry into a material definitive agreement to acquire Watford Holdings Ltd. through a merger. Under the terms of the Agreement and Plan of Merger, Watford's common shares will be acquired for $31.10 in cash per share. This transaction is expected to close in the first quarter of 2021, subject to customary closing conditions, including shareholder approval from Watford and regulatory approvals such as the Hart-Scott-Rodino Act. The acquisition signifies a strategic move by Arch Capital to consolidate its interests in Watford, given that affiliates of Arch Capital already manage Watford's underwriting business and a portion of its investment portfolio. The merger agreement includes standard provisions such as representations, warranties, and covenants, as well as termination clauses with a specified break-up fee of $18,660,000 payable by Watford under certain circumstances, particularly if Watford enters into an agreement for a superior unsolicited proposal.

Key Highlights

  • 1Arch Capital Group Ltd. (ACGL) is acquiring Watford Holdings Ltd. via a merger.
  • 2The acquisition price is $31.10 in cash per Watford common share.
  • 3The transaction is expected to close in the first quarter of 2021.
  • 4Closing is contingent upon customary conditions, including shareholder and regulatory approvals.
  • 5Arch Capital subsidiaries (Arch Re and Gulf Re) hold significant stakes in Watford and have entered into a Voting and Support Agreement to vote in favor of the merger.
  • 6Watford may be required to pay a termination fee of $18,660,000 under specific circumstances.
  • 7Affiliates of Arch Capital already manage key aspects of Watford's business.

Frequently Asked Questions

This 8-K filing announces Arch Capital Group Ltd.'s entry into a material definitive agreement to merge with and acquire Watford Holdings Ltd. It details the terms of the merger, the consideration to be paid to Watford shareholders, and the conditions required for the transaction to close.

Holders of Watford common shares will receive $31.10 in cash per share, without interest, as the merger consideration. Restricted share units, subject to vesting conditions, will also be settled in cash based on the merger consideration.

Yes, the merger is subject to several conditions, including approval by Watford shareholders, expiration of waiting periods under antitrust laws (like the Hart-Scott-Rodino Act), absence of legal restraints, accuracy of representations and warranties, and absence of a material adverse effect on Watford. Additionally, Arch Capital's obligation to close is contingent on Watford's non-investment grade portfolio not suffering a loss exceeding $238 million from September 30, 2020, until two business days before closing.

Arch Capital's subsidiaries, Arch Reinsurance Ltd. and Gulf Reinsurance Ltd., are parties to a Voting and Support Agreement with Watford. They collectively hold approximately 12.6% of Watford's common shares and 6.6% of its preference shares, and have agreed to vote these shares in favor of the merger, ensuring a key portion of the shareholder vote is secured.