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ARCH CAPITAL GROUP LTD. 8-K Report, Material Agreement (Nov 2, 2020)

Filed November 2, 2020For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) has filed an 8-K report detailing significant amendments to its Agreement and Plan of Merger with Watford Holdings Ltd., originally announced on October 14, 2020. The primary update on November 2, 2020, involves an increase in the cash consideration for Watford's common shareholders to $35.00 per share. This amendment also adjusts the conditions for ACGL's obligation to close the merger, specifically by setting a loss limit of $208 million for Watford's non-investment grade portfolio from September 30, 2020, through the pre-closing period. Furthermore, the revised agreement includes an increased termination fee payable by Watford to ACGL, set at $28,100,000 under certain circumstances, such as Watford entering into an agreement for a superior proposal. In conjunction with these amendments, ACGL has also entered into a Voting and Support Agreement with Enstar Group Limited and its subsidiary Cavello Bay Reinsurance Limited, who collectively agreed to vote their Watford shares in favor of the merger. These changes reflect a revised deal structure aimed at finalizing the acquisition of Watford Holdings Ltd.

Key Highlights

  • 1Arch Capital Group Ltd. (ACGL) amended its merger agreement with Watford Holdings Ltd. on November 2, 2020.
  • 2The cash consideration per Watford common share has been increased to $35.00.
  • 3ACGL's obligation to close the merger is now conditional on Watford's non-investment grade portfolio not exceeding $208 million in losses.
  • 4The termination fee payable by Watford to ACGL has been increased to $28,100,000 under specified conditions.
  • 5Enstar Group Limited and its subsidiary Cavello Bay Reinsurance Limited have agreed to vote their Watford shares in favor of the amended merger.
  • 6The amendment modifies key terms, including deal price and closing conditions, reflecting ongoing negotiations for the acquisition.

Frequently Asked Questions

The primary change is an increase in the cash consideration paid to Watford's common shareholders, which will now receive $35.00 per share. Additionally, the conditions for Arch Capital Group Ltd. to complete the merger have been adjusted, including a cap on losses for Watford's non-investment grade portfolio and an increased termination fee payable by Watford.

Arch Capital Group Ltd.'s obligation to close the merger is now conditioned on Watford's non-investment grade portfolio not experiencing losses exceeding $208 million from September 30, 2020, up to two business days before the merger closing date.

Enstar Group Limited and its subsidiary Cavello Bay Reinsurance Limited are significant shareholders in Watford Holdings Ltd. They have entered into a Voting and Support Agreement with Arch Capital Group Ltd., agreeing to vote all of their Watford common shares in favor of the amended merger and its associated transactions.

If Watford terminates the merger agreement under specific circumstances, such as agreeing to a superior proposal, it will be required to pay Arch Capital Group Ltd. a termination fee of $28,100,000.