Markel Corporation (NYSE:MKL) recently announced that it will acquire Alterra for $31/share in stock and cash, a 34% premium to the trading price, or 1.05x current book. The deal is expected to close 1H13. The companies also detailed their Sandy losses. Alterra commented that it expects Sandy losses in the $90 - $120 million range. Alterra shareholders will receive $10 plus 0.04315 Markel Corporation (NYSE:MKL) shares for each Alterra share. Following the deal Markel Corporation (NYSE:MKL) shareholders would own 69% of the combined entity. There are no major contingencies and the break-up fee is 3% ($94.5 million).
This is a big acquisition for the value oriented insurance firm. Markel has a market cap of $4.15 billion, just to get an idea of how big this acquisition is for the firm. Many consider Markel to be a mini Berkshire Hathaway. Readers can find out more about
Markel has a long and distinguished history of operating an insurance company that generates underwriting profits, and the addition of Alterra increases the ability to do even more, according to the company.
Additionally, Markel traditionally invests the majority of shareholders' equity account into equity ownership positions of public and private companies. Today, their equities as a percentage of shareholder capital is 62%. After the close of the transaction, we will begin a process of recasting the Alterra investment portfolio towards our historical practices at Markel.
Curious for more reasons as to why Markel made this decision. Want to ask Tom Gayner himself? Gayner will be speaking at the (entirely online) upcoming Best Ideas 2013 conference. Attendees will be able to ask Gayner questions at the conference.
The conference costs $500, which is already extremely low for this type of event, however, ValueWalk readers (only) are being offered a special discount to attend the conference for $317, or 37% off. This offer expires Friday, December 28th so act quickly. Readers of ValueWalk can get the discount by clicking on this link.
Disclosure: No position