Insurer Hardy rebuffs bid from Ireland’s Beazley

By Lorraine Turner, Reuters

LONDON — Lloyd’s of London insurer Beazley said it still hoped to clinch a takeover of Hardy Underwriting after its smaller peer rejected an initial 300 pence per share approach this month. Dublin-based Beazley said its proposed cash offer on Oct. 6 valued Hardy at about 155 million pounds (US$247.9 million). The approach, which represented a 36 percent premium to Hardy’s closing share price on Oct. 5, was rejected by the Bermuda-based insurer in a letter dated Oct. 8. Hardy said the offer substantially undervalued the company and its board had rejected it unanimously as an opportunistic attempt to buy the group.

Hardy’s thinly traded shares were up 16.8 percent at 285 pence by 1047 GMT, trading around levels last seen in mid-March. Shares in Beazley rose 4.7 percent to 119.9 pence, making the company the second-biggest riser in the FTSE 250 share index.

Analysts said the rise reflected prospects that Beazley would earn a positive return on its cash reserves — generating almost no returns now because of low interest rates — if the deal goes ahead. Consolidation among Lloyd’s insurers, which offer cover against large-scale risks such as natural disasters, has long been mooted as cyclically low insurance prices weigh on their shares, although deals can be difficult to secure. Brit Insurance agreed to a 850 million pound offer from buyout firm Cinven Capital Partners and Apollo Management last month. Beazley, which in July said its first-half profit nearly quadrupled, said on Monday it would continue talks with Hardy’s board and shareholders with the aim of agreeing a recommended deal. “Beazley believes that the two groups are highly compatible. Both have well-regarded underwriting teams, renowned track records of profitability and a shared objective to develop a diverse speciality insurance franchise,” the insurer said in a statement. But some analysts questioned the rationale behind the bid. “Beazley has made a cheeky approach to acquire Hardy … that contains little detail on why the acquisition would make sense and what it would add to shareholders,” said Mark Williamson at KBC Peel Hunt. “I don’t believe that this is a situation of two plus two makes five; I think it may well be three. The implication has to be that the only logic is that it sees the opportunity to pick a quality asset up on the cheap and on this basis it makes no sense for shareholders to accept such an offer,” he added. Hardy suffered more heavily than its peers this year from a string of catastrophes such as the Chilean earthquake and Australian hail storms, which cut heavily into its first-half profit. Williamson said Hardy’s underwriting performance record is strong and the insurer is likely to regain its premium rating after the blip this year.