(By Balaseshan) Markel Corp. (NYSE: MKL), which markets and underwrites specialty insurance products, said it has agreed to buy Alterra Capital Holdings Ltd. (NASDAQ: ALTE) for about $3.13 billion, or $31 per share in cash and stock, to diversify into reinsurance.
Under the terms of the agreement, each Alterra common share will be converted into the right to receive 0.04315 Markel common shares (with cash paid for fractional shares) plus a cash payment of $10.
Following the merger, Markel's existing shareholders will own approximately 69% of the combined company on a fully diluted basis, with Alterra's shareholders owning approximately 31%.
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The combination of Markel and Alterra is expected to create significant benefits for the shareholders of both companies, and to provide a robust foundation for strong financial performance going forward.
Following the close of the transaction, Markel is expected to write annual gross premiums of about $4.4 billion and to have about $6 billion in equity with capital flexibility to support future growth.
Complementary business profiles provide important diversification of risk, with Markel adding reinsurance and large-account insurance to its specialty insurance portfolio, the companies noted.
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Following the close of the transaction, Markel's business is expected to be about 50% short-tail, 50% long tail; 67% insurance and 33% reinsurance.
The deal is expected to close in the first half of 2013.
Upon closing, two directors designated by Alterra's current board will be added to the board of directors of Markel.
MKL is trading down 4.45% at $464.43 on Wednesday, while ALTE trades 26.26% higher at $29.23.