Sompo to Buy Endurance for $6.3 Billion in Its Biggest Deal

  • Offer is 43 percent premium to insurer’s closing price Monday
  • Japanese insurers expanding abroad as growth slows at home

Sompo Holdings Inc. agreed to buy Bermuda-based insurer Endurance Specialty Holdings Ltd. for about $6.3 billion, the company’s biggest acquisition as it expands outside of Japan.

The buyer offered $93 a share in cash for Endurance, 43 percent more than Monday’s closing price of $64.96. The acquisition is subject to the approval of Endurance’s shareholders and Sompo plans to complete the purchase by March 2017, the Tokyo-based company said in a statement Wednesday.

Sompo, which largely sat out a multi-billion-dollar merger-and-acquisition spree by its peers in the past two years, is joining other Japanese insurers in expanding abroad to counter slowing growth at home. Dai-ichi Life Insurance Co. bought Protective Life Corp. last year, and Sumitomo Life Insurance Co. agreed to purchase Symetra Financial Corp. for about $3.8 billion.

The offer price “is on the high end of the range because you usually pay a 30 percent to 40 percent premium on a regular M&A,” said Steven Lam, a Hong Kong-based analyst at Bloomberg Intelligence. “Japanese insurers don’t seem to be good at bargaining.”

Click here to find out what Sompo’s purchase means for its overseas earnings.

Endurance shares surged 35 percent in New York Tuesday after the Nikkei newspaper reported a deal was imminent and the insurer confirmed it was in talks with the Japanese firm. Sompo closed 2.7 percent higher in Tokyo trading Wednesday.

‘Attractive Market’

“The U.S. is a pretty attractive market for Japanese insurers because you have a declining population in Japan as well as the negative interest-rate environment,” Robert Haines, a senior analyst at CreditSights Inc., said by phone Tuesday. “The conditions are very ripe and conducive for further consolidation in the sector.”

Endurance Chief Executive Officer John Charman has been expanding through acquisitions. He struck a deal last year to buy Montpelier Re Holdings Ltd. and sought in 2014 to combine with rival Aspen Insurance Holdings Ltd. with a $3.2 billion hostile takeover bid. Endurance eventually terminated the attempt after the target company rebuffed the offer.

‘Top Pick’

“Endurance is our top pick and a franchise we view as extremely high-quality with an excellent management team,” Quentin McMillan, an analyst at Keefe Bruyette & Woods, said in a note to clients Tuesday. “We do not view the premium as too high for an asset as high-quality as Endurance and see this as a deal in which both sides benefit.”

Endurance, which has operations in the U.S., the U.K. and Bermuda, writes property-casualty policies for risks such as agriculture, marine and energy. The company also has reinsurance units, which help provide coverage for primary insurance carriers.

Citigroup Inc. and Shearman & Sterling LLP advised Sompo, while Endurance used Morgan Stanley and Skadden, Arps, Slate, Meagher & Flom LLP, according to a statement.

— With assistance by Katherine Chiglinsky, and Jordyn Holman

    Before it's here, it's on the Bloomberg Terminal.