Tokio Marine to acquire HCC Insurance Holdings in $7.5bn deal

August 2015 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

In what is being described as a major expansion of its international business, Tokio Marine Holdings, Inc. (TMHD) has announced that it will acquire HCC Insurance Holdings, Inc. (HCC) in a $7.5bn transaction.

The transaction is a definitive agreement under which TMHD will acquire all outstanding shares of HCC, comprising property & casualty, accident & health and other specialty insurance businesses, for $78 in cash per share, through TMHD’s wholly owned subsidiary, Tokio Marine & Nichido Fire Insurance Co., Ltd.

The acquisition price represents a 35.8 percent premium to HCC’s average share price over the past

month and a 37.6 percent premium to the share price as of close of business on 9 June 2015.

Established in Japan in 1879, TMHD is the insurance holding company for Tokio Marine Group, which undertakes domestic non-life insurance, domestic life insurance, international business, and financial and general businesses. With a presence in approximately 40 countries, Tokio Marine Group is one of the world’s most globally diversified and financially secured insurance groups.

The acquisition of HCC significantly enhances Tokio Marine’s operations in the United States, the largest insurance market in the world, and internationally. With strong business platforms in Japan and in international markets, the transaction solidifies Tokio Marine’s standing as a truly global insurer with premier specialty franchises.

“In line with the strategy to expand our International business, the acquisition enables Tokio Marine to build a more diversified and highly profitable global portfolio with low volatility, taking into account the nature of HCC’s businesses which are largely non-correlated, have limited catastrophe exposure and are less dependent on property & casualty market cycles,” said Tsuyoshi Nagano, president of Tokio Marine. “HCC is a top tier specialty insurer with market leading underwriting capabilities. Leveraging Tokio Marine’s financial strength and global footprint, HCC will further expand the revenues, profits and capabilities of Tokio Marine.”

The acquisition of HCC represents Tokio Marine’s most significant deal since it acquired Delphi Financial Group, Inc. in 2012, and Philadelphia Consolidated Holding Corp. and Kiln Ltd. in 2008.

“This transaction yields significant value for HCC’s shareholders,” said Christopher J.B. Williams, chief executive of HCC. “With Tokio Marine, HCC gains an international footprint to expand our diverse portfolio and expertise globally, a financial foundation on which to compete with larger insurers and the opportunity to offer our clients expanded coverages. We believe the combination is an excellent extension of Tokio Marine’s stated long-term business strategy, and we are excited to be a part of that strategy.”

Founded in 1974, HCC underwrites more than 100 classes of specialty insurance products including a diverse portfolio of specialty businesses, such as D&O, agriculture, primary casualty, aviation, surety, sports and entertainment disability/contingency and public risk – all of which require strong technical underwriting expertise.

“Tokio Marine has great respect for the consistent profitability that HCC has achieved under the leadership of its highly experienced management team,” said Mr Nagano. “With shared values and the continued support from the management team, we will build a long and successful partnership together.”

During the transaction, Credit Suisse and Evercore acted as financial advisers to Tokio Marine and Sullivan & Cromwell LLP has provided external legal counsel. For HCC, Goldman Sachs acted as financial adviser and Willkie Farr & Gallagher LLP provided external legal counsel.

The boards of both TMHD and HCC have unanimously approved the transaction – also subject to the approval of HCC’s shareholders and the approval of various regulatory authorities, as well as other customary closing conditions – which is expected to close in the fourth quarter of 2015.

Fraser Tennant