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Markel buying Alterra Capital in a $3.13 billion deal [Richmond Times-Dispatch, Va.]

By John Reid Blackwell, Richmond Times-Dispatch, Va.
McClatchy-Tribune Information Services

Dec. 20--Henrico County-based specialty insurer Markel Corp. has agreed to the largest acquisition in the company's history.

The deal to buy Bermuda-based Alterra Capital Holdings Ltd. for about $3.13 billion in cash and stock would expand Markel's insurance business from three to five business lines, adding reinsurance and large account insurance.

The deal, which requires shareholder and regulatory approvals, would create a company with about $4.4 billion in annual gross premium revenue with an investment portfolio of about $16 billion. It is expected to close in the first half of 2013.

"We believe that we are forming a winning combination that creates value for both sets of shareholders and all of our policyholders, as well as our associates," Markel Vice Chairman Steven Markel said in a conference call with analysts and investors.

Markel shares dropped 10.25 percent, or $49.81, to $436.24 on the New York Stock Exchange. Alterra shares rose nearly 22 percent, or $5.03, to $28.18.

Markel will remain based in Henrico, but company executives said on the conference call that they expect to record severance costs as the two companies are integrated.

Alterra will maintain a staff in Bermuda, especially for its reinsurance underwriting business.

"Bermuda is an active insurance marketplace," said Bruce Kay, a spokesman for Markel.

Markel has about 2,666 employees at 37 U.S. and international offices, not including businesses it owns as part of its Markel Ventures investment subsidiary.

Alterra has about 490 employees at 31 U.S. and international offices.

Acquiring Alterra's large account insurance business puts Markel into insuring larger companies such as Fortune 1000s. Historically, the company has served smaller businesses.

Under the deal, shareholders of Alterra will get .043 Markel share and $10 in cash for each share they own, the companies said in a statement.

The offer of $31 per share represents a premium of 34 percent to Alterra's closing stock price of $23.15 on Tuesday.

Following the acquisition, Markel's shareholders will own about 69 percent of the combined company, with Alterra's shareholders owning about 31 percent.

W. Marston Becker, Alterra's president and chief executive officer, is expected to leave the company after the deal closes. Two directors designated by Alterra's current board will be added to Markel's board.

Markel's largest deal previously was an acquisition in 2000 of Bermuda-based Terra Nova Holdings Ltd., which was valued at less than $1 billion.

In recent years, Markel has ventured into sectors other than specialty insurance, setting up an investment subsidiary called Markel Ventures that has acquired companies such as health care providers as well as makers of bakery equipment and dredging supplies.

jblackwell@timesdispatch.com

(804) 775-8123

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(c)2012 the Richmond Times-Dispatch (Richmond, Va.)

Visit the Richmond Times-Dispatch (Richmond, Va.) at www.timesdispatch.com

Distributed by MCT Information Services

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