Watford’s stock falls as Arch Capital’s revised buyout bid represented a discount

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Shares of Watford Holdings Ltd. dropped 4.1% in morning trading, after Arch Capital Group Ltd. agreed to raise its buyout bid for Watford by 12%, but the new bid was still below the previous session’s record closing price. Arch Capital shares rose 1.7% in morning trading. The company said the new bid for the property and casualty insurer is for $35.00 a share in cash, representing a value of $700 million, up from the original bid of $31.30 a share announced on Oct. 9., which represented a value of $622 million. Watford’s stock had closed on Friday at a record $36.00. Arch will assign its interests and obligations under the merger deal to a newly formed entity, of which Arch owns 40% and investment partners Warburg Pincus LLC and Kelso & Co. each own 30%. The deal is still expected to close in the first quarter of 2021. “We continue to believe in the merits of this compelling opportunity and are pleased to be making this revised offer,” said Arch Capital Chief Executive Marc Grandisson. “The increased premium and the addition of Warburg Pincus and Kelso as active investment partners will position Watford to capitalize on its significant value generation potential while ensuring continuity of service for all policyholders.” Watford’s stock has more than doubled (up 110.5%) over the past three months while Arch shares have slipped 0.2%. The S&P 500 has gained 0.8% the past three months.
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