Why Aspen Insurance Holdings Limited Shares Rocketed Higher

Aspen shares vault higher after receiving an unsolicited takeover bid. See what its board of directors had to say about the offer.

Sean Williams
Sean Williams
Apr 14, 2014 at 8:24PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Aspen Insurance Holdings (NYSE:AHL), a global insurance and reinsurance company specializing in commercial and environment liability, as well as casualty insurance, jumped by as much as 19% after receiving an unsolicited takeover offer from Endurance Specialty Holdings (NYSE:ENH).

So what: Under the terms of the offer, Endurance was willing to acquire Aspen for $47.50 per share in a mixed 60% stock and 40% cash deal valuing the company at $3.2 billion (a 21% premium to its close on Friday). Endurance believed acquiring Aspen would be immediately accretive to EPS and contribute to $100 million in annual cost savings. However, Aspen's board of directors rejected Endurance's proposal with Glyn Jones, chairman of the board, noting that the deal was "not in the best interests or Aspen or its shareholders. Endurance's ill-conceived proposal undervalues our company, represents a strategic mismatch, carries significant execution risk, and would result in substantial dis-synergies."

Now what: Tell us how you really feel, Glyn! It's pretty evident that there isn't a price that Endurance can put on Aspen Insurance that's going to sway the board toward accepting a buyout. But that may not stop another suitor from stepping up to the plate or for Endurance to attempt a hostile takeover of Aspen and take its offer directly to shareholders. This is a situation that investors would be wise to keep their eyes on. However, it's rarely prudent to chase a stock higher solely on the premise of buyout rumors. With that being said, I'm going to watch the festivities play out from the sidelines.