Banking, finance, and taxes

Is Endurance Specialty the Largest Potential Merger You Never Heard Of?

Jon C. Ogg

Published: October 4, 2016 3:39 pm

Last Updated: January 13, 2020 2:48 am

Generally speaking, a merger worth $6.5 billion is considered a fairly large merger. In this particular instance, it is likely that the public may have never heard of either company involved. Sorry, the largest reportedly involved.

Endurance Specialty Holdings Ltd. (NYSE: ENH) was last seen trading up 35% on roughly 20-times normal trading volume. A report from Nikkei Asian Review shows that Sompo Japan Nipponkoa Insurance has firmed up plans to acquire Endurance Specialty.

As far as why the public has never heard of Endurance Specialty, they are a business insurance provider. The company has a strong U.S. operation, and they offer specialty lines of personal and commercial property and casualty insurance – as well as reinsurance. Endurance is also based in Bermuda and 2015 revenue was $2.1 billion with income being $359 million from operations and $355 million net.

According to the report from Nikkei Asian Review, Sompo Japan will purchase all of the outstanding shares of Endurance without a tender offer. This is unusual for U.S. companies but is apparently normal in Bermuda.

As far as the deal’s size, this is supposedly seen as being close to $6.5 billion. Even after Endurance’s 35% pop on the news, its market capitalization for the equity is right at $5.9 billion.

This move would be a welcome deal for Sompo. Have you heard about the great growth story in Japan? (Hint, neither has anyone else in about 25 years).

As far as what the Japanese buyers would get here, they would get a company that has been around since 2001 and covers many forms of insurance and reinsurance. Its focus on the U.S. and elsewhere would help a rather dull scenario for a Japanese company.

Endurance Specialty’s direct insurance segment offers the following forms of coverage: agriculture insurance covering multi-peril crop insurance, crop hail, livestock risk protection, and other agriculture risk management products, as well as casualty insurance, healthcare liability insurance, contract and commercial surety insurance, and many forms of specialty insurance that most of the public might not have ever considered.

For whatever it is worth, Endurance Specialty also just named a new Executive Vice President and Chief Executive Officer of U.S. Insurance effective September 12.

Endurance shares were last seen up 35% at $87.55, versus a 52-week range of $57.97 to $88.98 — with that high happening today. This would be far more than just a 52-week high. It would mark an all-time high. Endurance Specialty shares were trading at $64.96 as of Monday’s closing bell price, and the consensus analyst price target is $72.00.