Enstar Group has entered into a definitive merger agreement under which Sixth Street will acquire Enstar, with Liberty Strategic Capital, J.C. Flowers & Co, and other institutional investors participating in the transaction.
Enstar shareholders will receive a total of $338 in cash per ordinary share of Enstar payable upon closing of the transaction, representing a total equity value of $5.1 bn.
The consideration represents a premium of approximately 8.5% to the 90-day volume weighted average price (“VWAP”) of the company shares as of July 26, 2024, the last trading day prior to the announcement of the transaction, and 6.9% to the 60-day VWAP as of the same date.
Enstar has reported net earnings of $126 mn for the second quarter of 2024, a substantial increase from $21 mn in Q2 2023. The company’s return on equity (ROE) improved to 2.5% this quarter, compared to 0.5% from the previous year, while adjusted ROE was 2.9% for the quarter compared to last year’s 2.1%.
Run-off liability earnings (RLE) surged to $62 mn this quarter, compared to $10 mn in the same period last year.
This increase was driven by favourable loss developments in the construction defect sector, following active claims management, and improvements in the professional indemnity and directors and officers lines of business.
The M&A transaction, which has been unanimously approved and recommended to its shareholders by Enstar’s Board of Directors, is expected to close in mid-2025, subject to approval by Enstar’s shareholders, regulatory approvals, and other customary closing conditions.
Following the close of the transaction, Enstar will maintain its current operations and business strategy.
Over the past 30 years, Enstar has built a strong position in the legacy market founded on our exceptional scale and track record, pricing and claims expertise, and entrepreneurial culture
Dominic Silvester, Enstar’s Chief Executive Officer
“This transaction provides a full liquidity event for shareholders and is a testament to the strength of our team. We believe this is the best next step for our shareholders,” said Dominic Silvester.
The transaction is fully financed, with the full amount of equity being provided by Sixth Street, together with its co-investors, and Enstar agreeing to return approximately $500 mn from its balance sheet to its shareholders as part of the total $338 in cash per ordinary share received by shareholders of Enstar.
Enstar has a proven track record of delivering innovative legacy P&C insurance solutions and capitalising on attractive opportunities in the reinsurance market, while maintaining a conservative balance sheet and strong risk management culture
Michael Muscolino, Co-Founder and Partner at Sixth Street
“As an existing investor in Enstar, we have a deep respect for the business Enstar’s management team has built and look forward to continue supporting the Company’s current strategyt, while maintaining a conservative balance sheet and strong risk management culture,” said Michael Muscolino.
The agreement includes a 35-day “go-shop” period ending on September 2, 2024. This allows Enstar’s Board of Directors and advisors to seek alternative acquisition proposals from third parties. There’s no guarantee this will result in a better offer.
Enstar won’t disclose updates on the process unless deemed necessary or legally required. Enstar can terminate the merger agreement to accept a superior proposal during and after the “go-shop” period, following the agreement’s terms.
Once the transaction is complete, Enstar’s common stock will no longer be publicly listed, and the company will become privately held, continuing to operate under the Enstar name.
Goldman Sachs & Co. serves as financial advisor to Enstar. Paul, Weiss, Rifkind, Wharton & Garrison and Hogan Lovells US serve as legal advisors. Ardea Partners LP, Barclays PLC, and J.P. Morgan Securities advise Sixth Street. Simpson Thacher & Bartlett, Debevoise & Plimpton, and Cleary Gottlieb Steen & Hamilton act as legal advisors.
