The battle for merger with IPC gripped the industry earlier this year, with initial frontrunner Max Capital eventually being usurped by hostile challenger Validus. David Sandham met with the chief executives of these two worthy opponents to hear their take on the fight.

“There’s no point in talking about IPC,” says the man who lost one of the toughest takeover battles in reinsurance history.

I meet Marty Becker, chief executive of Max Capital (pictured, left), in the luxurious but dimly lit sunken foyer of the Metropole Hotel, Monte Carlo.

Becker is renowned for his cultivated, old fashioned, southern manners, but even he finds it difficult to mask a flicker of irritation each time I bring up the painful subject. “There’s no point in talking about IPC. Life goes on,” he says.

That battle, which Becker eventually lost, lasted three and a half months and cost Max Capital $18m. But Becker can console himself with the fact that his company’s shareholders supported the deal, even if those of his proposed merger partner – IPC – voted against it (and against the recommendation of their own board). More consolation is offered by the $50m merger termination penalty paid to Max.

Becker denies that, having proposed a merger and argued so publicly for its merits, and then having failed to close the deal, Max is now an obvious candidate for a merger approach from a third party. He rejects the argument that if merging was good for Max a couple of months ago, surely it remains good for Max now.

Becker points out that Max had not been looking for a deal before the agreement with IPC.

“We weren’t out prospecting for merger opportunities,” he says. “IPC, represented by J.P. Morgan, approached numerous firms, of which we were one.” Max appointed Merrill Lynch and Aon to advise it on the merger. “IPC was unique in that they were inviting firms to make proposals to them, driven by their desire to become more than a monoline.” This diversification argument was one of the key planks of Max’s case to IPC shareholders throughout the battle.

Another argument widely canvassed in favour of mergers among Bermudian reinsurers is about size.

With about $1.3bn in capital, wouldn’t Max gain more market power as part of a larger entity? Is $1.3bn enough? “It seems large to me,” says Becker.

Max recently acquired an A- rating from S&P, and Becker reveals that Max’s gross written premium will grow 25% for the full year 2009, “near the top of our peer group”. This growth is in part due to an earlier acquisition, however: Max at Lloyd’s, without which 2009 growth would be in “low double digits”.

Becker does not rule out the possibility of further expansion for Max Capital. “If you look back two years, we’ve added the US, we’ve added London… It’s a big world, and we’re only in part of it.”


“Was there some memo suspending the laws of capitalism that I didn’t get?” asks Ed Noonan, chief executive of Validus (pictured to the right of our opening image).

It’s a rebuff to criticism that hostile takeover bids are out of place in the relationship-driven reinsurance industry. Before his company won the battle for IPC, many believed that hostile mergers were not possible in Bermuda. That’s one myth Noonan has shattered.

I meet Noonan in the foyer of the Hotel de Paris, Monte Carlo, two days after speaking with Becker. Noonan grasps me firmly by the hand and is clearly in a good mood; the only trouble is, I cannot find a room to do the interview in (after all, this is Monte Carlo at the height of the bustling Rendez-Vous).

After exploring a corridor, I tentatively open a door revealing an unoccupied but fully equipped meeting room, and Noonan immediately suggests that we commandeer it. I am hesitant because the room has been set up ready for use by a well-known reinsurance broker. Noonan reassures me that they will not mind, sits down and helps himself to a bottle of water. When I hesitate to take a bottle myself, he jokes: “Coward!”


Noonan exudes confidence. He put his chips on the table in a hostile merger bid which most commentators expected him to lose; and he won.

Once the interview starts in earnest, Noonan’s careful statements make it clear he is keen to put distance between Validus and the now-concluded hostilities. “In the end, the deal was friendly,” he says.

Indeed, an exhausted IPC board, having had its decision to merge with Max Capital thrown out by its own shareholders, did eventually agree to a sweetened Validus offer. But the Validus-IPC deal was notable for Validus’s unsolicited initial approach and hostile legal actions against the merger target.

One of the legal weapons deployed was the unusual one of seeking a scheme of arrangement for IPC (against the wishes of the IPC board).

“Unfortunately,” Noonan says, “[the IPC board] would not talk to us. So we had to write letters in public.”

Noonan is clear that, at the outset, when IPC and Max Capital were courting, Validus was never approached by J.P. Morgan (which represented IPC on its partner search). “J.P. Morgan told us they had been retained but we would not be invited to the process. I don’t know the reason why we were not approached,” he says. “The day [when the Max-IPC deal was announced] we said ‘That is a great deal for Max. Why would IPC do that?’”

Over the next fortnight, Noonan prepared his own bid. A supporter was Jeff Greenberg, a Validus board member and shareholder. But Noonan denies speculation that Greenberg masterminded the deal.

“I wouldn’t say he was more or less involved than in any other business decision we take. I would not want to overstate or understate Jeff ’s involvement.

The idea originated with management,” he says.

Both IPC and Max were so dismissive of the Validus bid that it surprised many in the market when the IPC shareholders voted down the Max deal. “The conventional wisdom was that Max would win,”

Noonan says. But Validus had made a sterling effort to explain its case to IPC shareholders, and it was offering cash – eventually $7.50 – and 0.97 in Validus shares for each IPC share. “We met the vast majority of shareholders,” he says. “We never thought we would lose the shareholder vote.”

In victory, Noonan is gracious about his defeated merger rival, Marty Becker. “Marty made a very good deal for Max. The IPC shareholders voted against it.

Marty was a victim of the process. I have great respect for him. I hate that aspect of it … Marty is a very fine person,” he says. Has Noonan met Becker since the fight? No, but he adds: “I’m sure we’ll meet up.”

David Sandham is editor of Global Reinsurance

Timeline of the merger battle

Early 2009 On behalf of IPC, J.P. Morgan approaches Max Capital and others (but not Validus), inviting merger proposals
2 March Max Capital announces agreed stock only merger with IPC
31 March Validus makes hostile stock-only bid for IPC
2 April Max criticises Validus bid as an “unproductive disruption for its own opportunistic purposes”
5 April Validus accuses Max of a “substantial error” in its calculations of IPC book value
6 April Max says Validus’s accusation is “incorrect and misleading”
7 April IPC board rejects the Validus bid
15 April IPC board says it expects to complete the merger with Max in June
28 April Validus files lawsuit against Max and IPC, challenging the $50m termination fee and the no-talk provision
3 May Max accuses analysts Dowling & Partners of accepting a “paid partisan advocacy role” for Validus with “no public disclosure by Validus or Dowling”
4 May Marty Becker tells the Wall Street Journal that if IPC shareholders do not approve the IPC/Max combination, it is “unlikely that a deal between IPC and Validus would actually materialise”
13 May Bermuda Supreme Court dismisses application by Validus to expedite its suit against Max and IPC
14 May Validus applies to Bermuda Supreme Court for scheme of arrangement for IPC
18 May Validus adds $3 cash per share to its bid
18 May Becker says that Validus bid has “lack of traction among IPC’s shareholders”
29 May Bermuda Supreme Court dismisses Validus’s application for a scheme of arrangement
Early June Some equity analysts say they like the Max-IPC deal better than the Validus bid
4 June Max and IPC agree to pay IPC shareholders cash dividends totaling $2.50 after the IPC-Max merger
8 June Validus increases cash component to $3.75
10 June Max accuses Validus of making a “misleading statement” that it has a clear path “to close a transaction with IPC”
12 June IPC shareholders vote against merger with Max
15 June Validus says it will seek to replace IPC board if they do not agree to Validus’s bid soon
22 June Validus revises terms of the bid but says it will not revise money