Several months before striking a merger agreement with Intact Financial Corp., OneBeacon Insurance Group Ltd. considered a potential transaction with another company whose offer depended on achieving certain tax benefits. Talks with the unidentified third party fell through after Donald Trump was elected as president in November 2016, but "favorable" market conditions convinced President and CEO Timothy Miller that it was the right time to look for other suitors, according to a June 8 regulatory filing.
From mid-December 2016 to January 2017, the company's financial adviser, Credit Suisse, executed draft nondisclosure statements with seven companies, including Intact, after contacting 17 companies regarding a potential transaction.
With three bidders dropping out of the process by February, OneBeacon received nonbinding preliminary indications of interest from Intact, Party B, Party C and Party D, as referred to in the filing. Intact proposed to pay in cash between $18.00 and $20.00 per OneBeacon share; Party B offered to pay in cash $17.13 per share on a fully diluted basis; Party C proposed to pay $20.00 per share, entirely in its stock, Party D offered to pay in cash $18.00 per share.
The number of bidders dropped to two in the second round in March after Credit Suisse requested submissions of "markups." On March 10 and March 20, Party C and Party D opted out of the process.
The surplus notes issued to OneBeacon in connection with the 2014 sale of its non-specialty business to Armour Group Holdings Ltd. became an issue in its subsequent negotiations with the remaining bidders. While Party B imposed a condition that the notes be sold in an amount equal to their carrying value prior to the closing of the merger, Intact required the company's majority shareholder, White Mountains Insurance Group Ltd., to purchase the notes. The two parties lowered their bids when the insurer rejected their conditions.
In mid-April, OneBeacon told Intact it would not accept any offer less than $18.10 per share. With talks between Party B and OneBeacon falling through, Intact agreed to acquire OneBeacon for $18.10 per share in cash. OneBeacon also agreed to pay Intact termination fee of $85.1 million and reimburse its expenses by up to $22.0 million in case the deal is terminated.