After 78% Stock Plunge Tower to be Bought by Amtrust
Tower Group International Ltd., the insurer that plunged last year amid reserve shortfalls, arranged to get a lifeline from AmTrust Financial Services Inc.
Tower will be bought for about $172.1 million, or $3 a share by a reinsurer controlled by AmTrust’s founder, according to a statement today from Bermuda-based Tower. That compares with the closing price last week of $2.94. AmTrust will acquire assets tied to Tower’s commercial insurance operations, the New York-based buyer said in a separate statement today.
Tower declined 78 percent last year as the company said it needed to add to reserves for claims on policies including workers’ compensation and commercial auto coverage. The insurer hired JPMorgan Chase & Co. to evaluate strategic options and said in November it would cut about 140 jobs.
The deal is “designed to stabilize and secure Tower’s business,” AmTrust Chief Executive Officer Barry Zyskind said in a statement. “The Tower book of business will further establish AmTrust as a market leader in the small commercial insurance business.”
Tower rose 1 cent to $2.95 at 9:31 a.m. in New York. The shares sold for more than $22 in July. AmTrust advanced 0.7 percent to $8.35.
ACP Re Ltd., the company purchasing Tower, is owned by a trust established by AmTrust’s founder, according to today’s statement. Zyskind, along with AmTrust directors George Karfunkel and Michael Karfunkel, are founding shareholders of the insurer, according to a May regulatory filing. Beth Malone, a spokeswoman for AmTrust, declined to comment on the trust.
The acquisition is expected to be completed by the summer of this year, Tower said. JPMorgan and Bank of America Corp. provided financial advice to Tower. Guggenheim Securities LLC was AmTrust’s financial adviser.
Zyskind is seeking to restore investor confidence after AmTrust fell 22 percent last month as GeoInvesting, a website that provides research to subscribers, challenged the company’s accounting. He announced last week that the insurer authorized the repurchase of as much as $150 million of shares. AmTrust has a market value of about $2.5 billion, according to data compiled by Bloomberg.
(Editors: Dan Kraut, Rick Green)