PRELIMINARY PROXY STATEMENT DATED MAY 8, 2009 — SUBJECT TO COMPLETION

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. 1)

 

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Filed by a Party other than the Registrant o

 

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o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to § 240.14a-12

 

VALIDUS HOLDINGS, LTD.

(Name of Registrant as Specified in Its Charter)

 

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PRELIMINARY PROXY STATEMENT DATED MAY 8, 2009 — SUBJECT TO COMPLETION

19 Par-La-Ville Road
Hamilton HM11
Bermuda

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE  , 2009

 

May   , 2009

 

Notice is hereby given that a Special Meeting of Shareholders of Validus Holdings, Ltd. will be held at 19 Par-La-Ville Road, Hamilton HM11, Bermuda, on June   , 2009, at          , Atlantic Time, for the following purposes:

 

• to approve the issuance of Validus voting common shares, par value $0.175 per share, in connection with the acquisition of all of the outstanding common shares, par value $0.01 per share, of IPC Holdings, Ltd. pursuant to the Validus Amalgamation Agreement (as defined in the proxy statement on the following pages), the Scheme of Arrangement (as defined in the proxy statement on the following pages), the Exchange Offer (as defined in the proxy statement on the following pages) or otherwise; and

 

 

For further information concerning matters to be acted upon at the Validus special meeting, you are urged to read the proxy statement on the following pages.

 

If you are a shareholder of record, please sign, date and return the enclosed proxy in the return envelope furnished for that purpose, as promptly as possible, whether or not you plan to attend the meeting, or follow the instructions on the Validus proxy card to complete your proxy card on the Internet at the website indicated or by telephone. If you own your shares through a bank, broker, or other nominee, you will receive instructions from that institution on how to instruct them to vote your shares, including by completing a voting instruction form, or providing instructions by Internet or telephone. If you do not receive such instructions, you may contact that institution to request them. If you later desire to revoke your proxy for any reason, you may do so in the manner described in the attached proxy statement. Only shareholders of record as shown on the transfer books of Validus at the close of business on          , 2009 will be entitled to notice of, and to vote at, the Validus special meeting or any adjournments thereof. See The Validus Special Meeting beginning on page 94 in the proxy statement for more information.

 

By Order of the Board of Directors,

 

Lorraine Dean

Secretary

PRELIMINARY PROXY STATEMENT DATED MAY 8, 2009

19 Par-La-Ville Road
Hamilton HM11
Bermuda

SPECIAL MEETING OF SHAREHOLDERS
PROXY STATEMENT

 

This proxy statement is furnished to the holders of Validus voting common shares, $0.175 par value per share (the “Validus Shares” and, together with any non-voting common shares, $0.175 par value per share, the “common shares”) in connection with the solicitation of proxies by the board of directors of Validus Holdings, Ltd. (“Validus”) to be voted at a special meeting of shareholders (the “Validus special meeting”) on          , 2009, at       , Atlantic time, at the registered office of Validus, located at 19 Par-La-Ville Road, Hamilton HM11, Bermuda.

 

Validus shareholders will be asked at the Validus special meeting:

 

 

On March 1, 2009, IPC entered into an Agreement and Plan of Amalgamation, as amended on March 5, 2009, among Max Capital Group Ltd. (“Max”), IPC and IPC Limited (the “Max Amalgamation Agreement”) which would result in the amalgamation of Max with IPC Limited, a wholly-owned subsidiary of IPC that was formed for the purpose of the amalgamation (the “Proposed Max Amalgamation”).

 

On March 31, 2009, Validus announced that it had delivered to IPC an offer (the “Validus Amalgamation Offer,”) to acquire each outstanding IPC Share in exchange for 1.2037 Validus Shares. In connection with the Validus Amalgamation Offer, Validus also delivered a copy of the proposed agreement and plan of amalgamation (the “Validus Amalgamation Agreement”) signed by Validus so that, upon termination of the Max Amalgamation Agreement, IPC would be able to sign the Validus Amalgamation Agreement with the certainty of an agreed transaction. As described in this proxy statement under The Acquisition — Background of the Acquisition, the board of directors of IPC has determined that the Validus Amalgamation Offer does not constitute a superior proposal to the Proposed Max Amalgamation and Max has not released IPC from the prohibition in the Max Amalgamation Agreement that prevents IPC from even discussing the Validus Amalgamation Offer with Validus. Therefore, in order to consummate the Acquisition without the cooperation of IPC’s board of directors, Validus is pursuing a three-part plan.

 

First, Validus is asking IPC shareholders to vote “against” the Proposed Max Amalgamation. If the Proposed Max Amalgamation is voted down by IPC shareholders, IPC would be able to terminate the Max Amalgamation Agreement and accept the Validus Amalgamation Offer.

 

Second, Validus intends to commence in the near future an exchange offer (the “Exchange Offer”) for all of the outstanding IPC Shares. The Exchange Offer would allow Validus to complete the Acquisition of IPC shortly following the IPC annual general meeting, if the IPC shareholders vote down the Proposed Max Amalgamation and the other conditions to the Exchange Offer are satisfied. Under the terms of the Exchange Offer, IPC shareholders would receive 1.2037 Validus Shares for each IPC Share. The Exchange Offer will be subject to certain conditions described in the prospectus /offer to exchange included in the Registration Statement on Form S-4 (the “Offer to Exchange”) filed by Validus with the SEC, including the tender of at least 90% of the total outstanding IPC Shares (on a fully diluted basis), termination of the Max Amalgamation Agreement, and the consent of Validus’ lenders. Under Bermuda law, if Validus acquires 90% or more of IPC

Shares in the Exchange Offer, Validus will have the right to acquire the remaining IPC Shares in a second-step acquisition under Bermuda law. The Exchange Offer will not be conditioned on regulatory approvals or the elimination of the possible termination fee to Max.

 

Third, Validus intends to petition the Supreme Court of Bermuda to approve a “scheme of arrangement” (the “Scheme of Arrangement”) under which Validus would acquire all IPC Shares under the same economic terms as in the Validus Amalgamation Offer. The Scheme of Arrangement can be accomplished — without the approval of IPC’s board of directors — if approved by IPC shareholders at two shareholder meetings and sanctioned by the Supreme Court of Bermuda. The first shareholder meeting is a court-ordered meeting (the “court-ordered IPC meeting”) at which IPC shareholders can vote to approve the Scheme of Arrangement. In addition, if IPC’s board of directors continues to be uncooperative despite shareholder approval at the court-ordered IPC meeting, IPC shareholders can call a second meeting (the “IPC special general meeting”) at which IPC shareholders can require IPC to approve and be bound by the Scheme of Arrangement and to terminate the Max Amalgamation Agreement. Following IPC shareholder approval at both of these meetings, and approval by the Supreme Court of Bermuda, the Scheme of Arrangement would become effective and IPC would become a subsidiary of Validus. The Scheme of Arrangement would be approved with the vote of a majority in number of the holders of IPC Shares voting at the court-ordered IPC meeting, whether in person or by proxy, representing 75% or more in value of the IPC Shares voting at the court-ordered IPC meeting, whether in person or by proxy. The required vote at the second meeting is an affirmative vote of the holders of a majority of IPC Shares voting at the meeting.

 

Validus is soliciting proxies from holders of Validus Shares at the Validus special meeting in order to be able to issue the Validus Shares to IPC shareholders in connection with the Acquisition. The Share Issuance will become effective only if it is approved by Validus shareholders and the IPC Shares are exchanged for Validus Shares, pursuant to the Acquisition. The affirmative vote of a majority of the votes cast at the Validus special meeting at which a quorum is present in accordance with Validus’ bye-laws is required to approve each matter to be acted on at the Validus special meeting, including the Adjournment Proposal.

The Validus Amalgamation Offer, the Exchange Offer and the Scheme of Arrangement are alternative methods for Validus to acquire all of the issued and outstanding IPC Shares on the same economic terms. Ultimately, only one of these transaction structures can be pursued to completion. Validus intends to seek to acquire all IPC Shares by whichever method Validus determines is most effective and efficient.

 

Assuming closing of the Acquisition, based on Validus’ and IPC’s capitalization as of December 31, 2008 and the exchange ratio of 1.2037, Validus would issue 67,338,947 Validus Shares in connection with the Acquisition and IPC shareholders would own approximately 43% of the issued and outstanding common shares of Validus on a fully-diluted basis.

 

Shareholders of record as of the close of business on          , 2009 will be entitled to vote at the Validus special meeting. As of March 13, 2009, there were 58,849,289 outstanding Validus Shares entitled to vote at the Validus special meeting, and 19,771,422 Validus non-voting common shares. Each Validus Share entitles the holder of record thereof to one vote at the Validus special meeting; however, if, and for so long as, the Validus Shares of a shareholder, including any votes conferred by “controlled shares” (as defined below), would otherwise represent more than 9.09% of the aggregate voting power of all Validus Shares entitled to vote on a matter, the votes conferred by such Validus Shares will be reduced by whatever amount is necessary such that, after giving effect to any such reduction (and any other reductions in voting power required by Validus’ bye-laws), the votes conferred by such Validus Shares represent 9.09% of the aggregate voting power of all Validus Shares entitled to vote on such matter. “Controlled shares” include, among other things, all shares that a person is deemed to own directly, indirectly or constructively (within the meaning of Section 958 of the Internal Revenue Code of 1986 or Section 13(d)(3) of the Securities Exchange Act of 1934, as amended).

 

Validus knows of no specific matter to be brought before the Validus special meeting that is not referred to in the notice of the Validus special meeting. If any such matter comes before the Validus special meeting, including any shareholder proposal properly made, the proxy holders will vote proxies in accordance with their judgment.

 

Validus common shares are quoted on the New York Stock Exchange (the “NYSE”) under the symbol “VR.” The closing price of a Validus common share on the NYSE on May 7, 2009, the last practicable date prior to the filing of this proxy statement, was $22.90. IPC

Shares, which are currently quoted on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “IPCR” and the Bermuda Stock Exchange under the symbol “IPCR BH,” would be delisted upon completion of the Acquisition.

 

The closing price of an IPC Share on NASDAQ on May 7, 2009, the last practicable date prior to the filing of this proxy statement, was $25.43. All references to “dollars” and “$” in this proxy statement refer to U.S. dollars.

 

Validus’ board of directors has unanimously adopted the Validus Amalgamation Agreement and authorized and approved the Share Issuance and deems it fair, advisable and in the best interests of Validus and its shareholders to consummate the Share Issuance, the Acquisition and the other transactions contemplated thereby. Validus’ board of directors recommends that Validus shareholders vote “FOR” the proposals submitted to Validus shareholders on the attached Validus proxy card. All of the officers and those directors and shareholders who are “qualified sponsors” (as defined in this proxy statement) and who own Validus Shares have indicated that they intend to vote the Validus Shares owned by them in favor of the Validus Share Issuance Proposal and the Adjournment Proposal. As of March 13, 2009, these persons and entities beneficially owned 42.4% of the voting interests relating to the Validus Shares. All of our officers, directors and qualified sponsors together own 57.4% of the economic interests relating to all outstanding common shares of Validus.

 

This proxy statement provides Validus shareholders with detailed information about the Validus special meeting and the Acquisition. You can also obtain information from publicly available documents filed by Validus and IPC with the SEC. Validus encourages you to read this entire document carefully, including the section entitled Risk Factors beginning on page 42.

 

Your vote is very important. Whether or not you plan to attend the Validus special meeting, please take time to vote by completing and mailing your enclosed proxy card or by following the voting instructions provided to you if you own your shares through a bank, broker or other nominee. If you do not receive such instructions, you may request them from that firm.

 

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the Share Issuance, passed upon the merits or fairness of the Share Issuance or passed upon the adequacy or accuracy of the disclosure in this proxy statement. Any representation to the contrary is a criminal offense.

 

This proxy statement is dated May   , 2009
and is first being mailed to Validus shareholders on or about          , 2009

 

Important Notice Regarding the Availability of Proxy Materials for the Validus
Special Meeting to be Held on June   , 2009

 

The proxy statement and the related proxy materials are available free of charge on Validus’ website at
www.validusre.bm.

SOURCES OF ADDITIONAL INFORMATION

 

This proxy statement includes information, including important business and financial information, also set forth in documents filed by Validus and IPC with the SEC, and those documents include information about Validus and IPC that is not included in or delivered with this proxy statement. You can obtain any of the documents filed by Validus or IPC, as the case may be, with the SEC from the SEC or, without charge, from the SEC’s website at http://www.sec.gov. Validus shareholders also may obtain documents filed by Validus with the SEC or documents incorporated by reference in this proxy statement free of cost, by directing a written or oral request to Validus at:

 

Validus Holdings, Ltd.

19 Par-La-Ville Road

Hamilton HM11

Bermuda

Attention: Jon Levenson

(441) 278-9000

 

If you would like to request documents, in order to ensure timely delivery, you must do so at least ten business days before the date of the meeting. This means you must request this information no later than          , 2009. Validus will mail properly requested documents to requesting shareholders by first class mail, or another equally prompt means, within one business day after receipt of such request.

 

The information concerning IPC, its business, management and operations presented or incorporated by reference in this proxy statement has been taken from, or is based upon, publicly available information on file with the SEC and other publicly available information. Although Validus has no knowledge that would indicate that statements and information relating to IPC contained or incorporated by reference in this proxy statement, in reliance upon publicly available information, are inaccurate or incomplete, to date it has not had access to the full books and records of IPC, was not involved in the preparation of such information and statements and is not in a position to verify any such information or statements.

 

The consolidated financial statements of IPC appearing in its annual report on Form 10-K for the year ended December 31, 2008 (including schedules appearing therein), and IPC management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2008 included therein, have been audited by an independent registered public accounting firm, as set forth in their reports thereon, included therein, and included and/or incorporated herein by reference. Validus has not obtained the authorization of IPC’s independent auditors to incorporate by reference the audit reports relating to this information.

 

Pursuant to Rule 12b-21 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Validus requested that IPC provide Validus with information required for complete disclosure regarding the businesses, operations, financial condition and management of IPC. Validus will amend or supplement this proxy statement to provide any and all information Validus receives from IPC, if Validus receives the information before the Validus special meeting and Validus considers it to be material, reliable and appropriate.

 

See Where You Can Find More Information on page 104.

 

TABLE OF CONTENTS

 

 

The following questions and answers highlight selected information from this proxy statement and may not contain all the information that is important to you. Validus encourages you to read this entire document carefully.

 

 

A:  The Validus special meeting will take place at          , Atlantic Time, on June   , 2009, at 19 Par-La-Ville Road, Hamilton HM11, Bermuda.

 

 

A:  The purpose of the meeting is to seek Validus shareholder approval of:

 

 

Even if shareholders approve the Share Issuance, the Share Issuance will take effect only if and when the IPC Shares are exchanged for Validus Shares pursuant to the Amalgamation Agreement, the Scheme of Arrangement, the Exchange Offer or otherwise.

 

 

A:  Based upon publicly available information about the number of IPC Shares outstanding and the proposed exchange ratio, Validus expects it would need to issue 67,338,947 Validus Shares in exchange for all outstanding IPC Shares. This number of Validus Shares will be greater than 20% of the total number of Validus Shares outstanding prior to such issuance. The listing requirements of the NYSE require that Validus shareholders approve any issuance of Validus Shares or securities convertible into or exercisable for Validus Shares if (a) the Validus Shares or other securities being issued will have voting power equal to or in excess of 20% of the voting power outstanding before such issuance or (b) the number of Validus Shares to be issued is or will be equal to or in excess of 20% of the number of Validus Shares or other securities before such issuance.

 

If the Share Issuance Proposal is approved by Validus’ shareholders, Validus will be permitted to issue Validus Shares in exchange for IPC Shares, pursuant to the Validus Amalgamation Agreement, the Scheme of Arrangement, the Exchange Offer or otherwise. Shareholders are not being asked to vote on the Acquisition and no vote of Validus shareholders is required on such matter.

 

 

A:  If the amalgamation is consummated, IPC would amalgamate with Validus Ltd., a direct wholly owned subsidiary of Validus, upon the terms and subject to the conditions set forth in the Validus Amalgamation Agreement. IPC shareholders (including the shareholders that do not vote in favor of the amalgamation but excluding Validus and its subsidiaries) would have the right to receive 1.2037 Validus Shares and cash in lieu of fractional shares in exchange for each IPC Share they hold, unless they exercise appraisal rights pursuant to Bermuda law. Upon the closing of the amalgamation, the separate corporate existence of Validus Ltd. and IPC would cease and they would continue as an amalgamated company and subsidiary of Validus (the “amalgamated company”) and the name of the amalgamated company would be “Validus Ltd.”

 

A:  Based on a number of factors described below under The Acquisition — Reasons Why Validus’ Board of Directors Recommends Approval of the Share Issuance, Validus’ board of directors believes that the Acquisition represents a compelling combination and excellent strategic fit that will enable Validus to capitalize on opportunities in the global reinsurance market. The Acquisition would allow IPC shareholders to benefit from the superior growth potential of Validus, which would be a leading carrier in Bermuda’s short-tail reinsurance and insurance markets following the Acquisition, with a strong balance sheet and quality diversification in profitable business lines.

 

 

A:  If IPC’s board of directors was to enter into the Validus Amalgamation Agreement following the termination of the Max Amalgamation Agreement, Validus believes the amalgamation could be completed in mid-to-late July.

 

Validus believes that if the conditions of the Exchange Offer are satisfied, it would be able to acquire IPC Shares under the Exchange Offer in June based on the following. If the Exchange Offer is commenced as late as May 15 and held open for 20 business days, it would expire on June 15, 2009. If the conditions to the Exchange Offer are satisfied, Validus will acquire at least 90% of the then-outstanding number of IPC Shares on a fully-diluted basis (excluding any IPC Shares beneficially owned by Validus or its subsidiaries).

 

Validus believes that, under the Scheme of Arrangement, it would be able to close the Acquisition of IPC as early as mid-July based on the assumptions that: (1) the Supreme Court of Bermuda will be able to accommodate the preferred hearings schedule and meeting dates and other procedural matters; (2) IPC shareholders holding at least one-tenth of the issued shares of IPC have requisitioned a special general meeting to be held in late June or early July to approve and have IPC be bound by the Scheme of Arrangement; and (3) the IPC directors, following the rejection of the Proposed Max Amalgamation, or IPC shareholders, convene the requisitioned special general meeting, allowing it to be held by mid-July.

 

 

A:  Under the terms of the Validus Amalgamation Agreement, each outstanding IPC Share (including any shares held by IPC shareholders that do not vote in favor of the amalgamation, but excluding any dissenting shares as to which appraisal rights have been exercised pursuant to Bermuda law, and excluding any shares held by Validus, IPC or any of their respective subsidiaries) would be cancelled and converted into the right to receive 1.2037 Validus Shares upon closing of the amalgamation. Under the terms of the Scheme of Arrangement, each outstanding IPC Share (excluding any IPC Shares beneficially owned by Validus, its subsidiaries or IPC), would be transferred to Validus in exchange for 1.2037 Validus Shares upon effectiveness of the Scheme of Arrangement. Under the terms of the Exchange Offer, each outstanding IPC Share (excluding any IPC Shares beneficially owned by Validus, its subsidiaries or IPC) that is validly tendered and not withdrawn would be exchanged for 1.2037 Validus Shares upon closing of the Exchange Offer.

 

IPC shareholders would not receive any fractional Validus Shares in the Acquisition. Instead, IPC shareholders would be paid cash in lieu of the fractional share interest to which such shareholders would otherwise be entitled. We refer to the exchange ratio and the cash in lieu of fractional shares as the “acquisition consideration”.

 

 

A:  Based on Validus’ and IPC’s capitalization as of December 31, 2008 and the exchange ratio of 1.2037, Validus would issue 67,338,947 Validus Shares in connection with the Acquisition and IPC shareholders would own approximately 43% of the issued and outstanding common shares, of Validus on a fully-diluted basis following closing of the Acquisition.

 

A:  Validus delivered the Validus Amalgamation Agreement to IPC on March 31, 2009 intending it to be executed in the exact form provided. Since then, in response to IPC’s rejection of the Validus Amalgamation Offer, we are proceeding with efforts to move forward with the transaction without IPC’s cooperation, including by soliciting your votes to approve the issuance of Validus Shares in connection with the Acquisition. These efforts will necessitate certain updates to the form of Validus Amalgamation Agreement which we believe are not material to Validus or IPC shareholders. We cannot predict what other changes may become necessary due to changed circumstances or as a result of negotiations with IPC should that occur. If any changes are made to the Validus Amalgamation Agreement that Validus believes are material to Validus shareholders, Validus will supplement this proxy statement and, if necessary, resolicit proxies from its shareholders.

 

 

A:  The Validus shareholders will not be entitled to exercise appraisal rights with respect to any matter to be voted upon at the Validus special meeting.

 

 

A:  No. Validus shareholders will not be entitled to any preemptive rights in connection with the Share Issuance.

 

 

A:  Upon the effectiveness of the Acquisition, Validus’ board of directors would consist of the directors serving on the board of directors of Validus before the Acquisition; however, Validus has expressed to the IPC directors that if they desire to participate in the leadership of Validus after the Acquisition, Validus would consider that.

 

 

A:  Upon closing of the Acquisition, the officers of Validus will be the officers serving Validus before the Acquisition.

 

 

A:  The affirmative vote of a majority of the votes cast at the Validus special meeting, at which a quorum is present in accordance with Validus’ bye-laws, is required to approve each of the Share Issuance Proposal and the Adjournment Proposal. The Share Issuance will become effective only if it is duly approved by Validus shareholders and all of the other conditions to the Acquisition are satisfied or waived and the Acquisition closes. The affirmative vote of a majority of the votes cast at the Validus special meeting is required to approve each other matter to be acted on, including any Adjournment Proposal. As of March 13, 2009, 42.4% of the outstanding Validus Shares were held by entities affiliated with Validus’ directors and executive officers.

 

Abstentions and “broker non-votes” will be counted toward the presence of a quorum at, but will not be considered votes cast on any proposal brought before, the Validus special meeting. Because the vote required to approve the proposals is the affirmative vote of a majority of the votes cast, assuming a quorum is present, a broker non-vote with respect to any proposal to be voted on at the Validus special meeting will not have the effect of a vote for or against the relevant proposal, but will reduce the number of votes cast and therefore increase the relative influence of those shareholders voting. For the Validus special meeting, a quorum consists

of two or more shareholders present in person and representing in person or by proxy in excess of 50% of the total issued Validus Shares throughout the meeting.

 

 

A:  Yes. Validus’ board of directors, taking into consideration the reasons discussed under The Acquisition — Reasons Why Validus’ Board of Directors Recommends Approval of the Share Issuance, unanimously adopted the Validus Amalgamation Agreement and authorized and approved the Share Issuance. Validus’ board of directors deems it fair, advisable and in the best interests of Validus to enter into the Validus Amalgamation Agreement and to acquire all of the outstanding IPC Shares and to consummate the Share Issuance. Validus’ board of directors recommends that Validus shareholders vote “FOR” the matters submitted on the Validus proxy card.

 

 

A:  All of the officers and those directors and shareholders who are “qualified sponsors” (as defined in this proxy statement) and who own Validus Shares have indicated that they intend to vote the Validus Shares owned by them in favor of the Share Issuance Proposal and the Adjournment Proposal. As of March 13, 2009, these persons and entities beneficially owned 42.4% of the voting interests relating to the Validus Shares. All of our officers, directors and qualified sponsors together own 57.4% of the economic interests relating to all outstanding common shares of Validus.

 

 

A:  Validus knows of no specific matter to be brought before the Validus special meeting that is not referred to in the notice of the Validus special meeting. If any such matter comes before the Validus special meeting, the proxy holders will vote proxies in accordance with their judgment.

 

 

A:  Only shareholders of record, as shown by the transfer books of Validus at the close of business on          , 2009 (the “Validus record date”) are entitled to receive notice of and to vote at the Validus special meeting or any adjournment thereof.

 

 

A:  Shareholders of record as of the close of business on          , 2009 will be entitled to vote at the Validus special meeting. As of March 13, 2009, there were 58,849,289 outstanding Validus Shares entitled to vote at the Validus special meeting, and 19,771,422 non-voting common shares.

 

 

A:  Validus urges you to read carefully this proxy statement, including its annexes, schedules and the documents incorporated by reference herein. You also may want to review the documents referenced under Where You Can Find More Information on page 104 and consult with your accounting, legal and tax advisors. Once you have considered all relevant information, Validus encourages you to fill in and return the attached proxy card (if you are a shareholder of record) or voting instruction form you receive from your bank, broker or other nominee (if you hold your Validus Shares in street name).

 

A:  If your shares are registered directly in your name as of the record date with our transfer agent, Bank of New York Mellon, you are considered the “shareholder of record” with respect to those shares, and the proxy materials and proxy card are being sent directly to you. As the shareholder of record, you have the right to vote in person at the meeting. If you choose to do so, you can bring the enclosed proxy card. Most shareholders of Validus hold their shares through a bank, broker or other nominee (that is, in “street name”) rather than directly in their own name. If you hold your shares in street name, you are a “beneficial holder,” and the proxy materials are being forwarded to you by your bank, broker or other nominee together with a voting instruction form. Because a beneficial holder is not the shareholder of record, you may not vote these shares in person at the meeting unless you obtain a valid proxy from the bank, broker or other nominee that holds your shares (and who has received a “legal proxy,” with a power of subdelegation, from the shareholder of record as of the record date) giving you the right to vote the shares at the meeting. Even if you plan to attend the Validus special meeting, we recommend that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the Validus special meeting.

 

 

A:  If you are the shareholder of record, you may direct your vote without attending the Validus special meeting by completing and mailing your proxy card in the enclosed pre-paid envelope. In addition, if you are the shareholder of record, you may grant a proxy to vote your shares at the Validus special meeting by telephone by calling 866-367-5524 and following the simple recorded instructions, twenty-four hours a day, seven days a week, at any time prior to 11:59 p.m., Eastern Time, on the day prior to the Validus special meeting. Alternatively, as a shareholder of record, you may vote via the Internet at any time prior to 11:59 p.m., Eastern Time, on the day prior to the Validus special meeting by going to http://proxy.georgeson.com, entering the company number and control number on your proxy card and following the instructions to submit an electronic proxy. If you vote by telephone or the Internet, you will be required to provide the control number contained on your proxy card. If you hold your Validus Shares in street name you should complete and return the voting instruction form you receive from your bank, broker or other nominee in accordance with the instructions you receive from your bank, broker or other nominee. Your voting instruction form may contain instructions from your bank, broker or other nominee that allow you to vote your shares using the Internet or by telephone. Please consult with your bank, broker or other nominee if you have any questions regarding the voting of shares held in street name.

 

 

A:  You are entitled to attend the Validus special meeting only if you are (i) a shareholder of record or (ii) a beneficial owner or other person holding a valid proxy from the bank, broker or other nominee that holds your shares (and who has received a “legal proxy,” with a power of subdelegation, from the shareholder of record as of the record date). If you are the shareholder of record, your name will be verified against the list of shareholders of record prior to your admittance to the Validus special meeting. You should be prepared to present photo identification for admission. If you hold your shares in street name and would like to be admitted to the meeting, you will need to provide a valid proxy from the bank, broker or other nominee that holds your shares (and who has received a “legal proxy,” with a power of subdelegation, from the shareholder of record as of the record date) and proof of beneficial ownership on the record date, such as a brokerage account statement showing that you owned Validus Shares as of the record date, a copy of the voting instruction form provided by your bank, broker or other nominee, or other similar evidence of ownership as of the record date, as well as your photo identification. If you do not comply with the procedures outlined above, you may not be admitted to the Validus special meeting.

 

 

A:  If you own your shares through a bank, broker or other nominee, you will receive instructions from that institution on how to instruct them to vote your shares, including by completing a voting instruction form, or providing instructions by Internet or telephone. If you do not receive such instructions, you may contact

that institution to request them. In accordance with NYSE rules, banks, brokers and other nominees who hold Validus Shares in street-name for customers may not exercise their voting discretion with respect to the Share Issuance. Accordingly, if you do not provide your bank, broker or other nominee with instructions on how to vote your street name shares, your bank, broker or other nominee will not be permitted to vote them at the Validus special meeting. Also, if your bank, broker or other nominee has indicated on the relevant proxy that it does not have discretionary authority to vote such street name shares, your bank, broker or other nominee will not be permitted to vote them. Either of these situations results in a “broker non-vote.”

 

A “broker non-vote” with respect to the Validus special meeting will not be considered as a vote cast with respect to any matter presented at the Validus special meeting, but will be counted for purposes of establishing a quorum, provided that your bank, broker or nominee is in attendance in person or by proxy. Because the vote required to approve the proposals is the affirmative vote of a majority of the votes cast, assuming a quorum is present, a broker non-vote with respect to any proposal to be voted on at the Validus special meeting will not have the effect of a vote for or against the relevant proposal, but will reduce the number of votes cast and therefore increase the relative influence of those shareholders voting.

 

Because your bank, broker or other nominee will not have discretionary authority to vote your shares, you must provide your bank, broker or other nominee with instructions on how to vote your shares or arrange to attend the Validus special meeting and vote your shares in person if you want your shares to be voted and to avoid a broker non-vote. If your bank, broker or other nominee holds your shares and you attend the Validus special meeting in person, you should bring a letter from your bank, broker or other nominee identifying you as the beneficial owner of the shares and authorizing you to vote your shares at the meeting.

 

 

A:  Abstentions and “broker non-votes” will be counted toward the presence of a quorum at, but will not be considered votes cast on any proposal brought before the Validus special meeting. Because the vote required to approve the proposals is the affirmative vote of a majority of the votes cast, assuming a quorum is present, a broker non-vote with respect to any proposal to be voted on at the Validus special meeting will not have the effect of a vote for or against the relevant proposal, but will reduce the number of votes cast and therefore increase the relative influence of those shareholders voting. See also The Validus Special Meeting — Record Date and Shares Entitled to Vote.

 

 

A:  If you sign and return a proxy card or voting instruction form without giving specific voting instructions, your shares will be voted “FOR” the Share Issuance Proposal and “FOR” the Adjournment Proposal and as the persons named as proxies may determine in their discretion with respect to any other matters properly presented for a vote before the Validus special meeting.

 

 

A:  You may change your vote or revoke your proxy at any time before your proxy is voted at the Validus special meeting. If you are a shareholder of record, you may change your vote or revoke your proxy by: (1) delivering to Validus (Attention: General Counsel) at 19 Par-La-Ville Road, Hamilton, HM11, Bermuda, a written notice of revocation of your proxy; (2) delivering to Validus an authorized proxy bearing a later date (including a proxy by telephone or over the Internet); or (3) attending the Validus special meeting and voting in person as described above under the question entitled How can I vote my shares at the Validus special meeting? Attendance at the Validus special meeting in and of itself, without voting in person at the Validus special meeting, will not cause your previously granted proxy to be revoked. For shares you hold in street name, you should follow the instructions of your bank, broker or other nominee or, if you have obtained a valid proxy from the bank, broker or other nominee that holds your shares (and who has received a

“legal proxy,” with a power of subdelegation, from the shareholder of record as of the record date) giving you the right to vote your shares at the Validus special meeting, by attending the Validus special meeting and voting in person.

 

 

If you have additional questions about the Acquisition, if you would like additional copies of this proxy statement, or if you need assistance voting your Validus Shares, you should contact Georgeson Inc. (“Georgeson”) at:

 

Georgeson Inc.
199 Water Street, 26th Floor
New York, New York 10038
Banks and Brokerage Firms Please Call: (212) 440-9800
All Others Please Call Toll Free: (888) 274-5146
E-mail inquiries: validus@georgeson.com

 

 

A:  You can find more information about Validus and IPC in the documents described under Where You Can Find More Information on page 104.

 

This summary highlights the material information in this proxy statement. To fully understand Validus’ proposals, and for a more complete description of the terms of the amalgamation, you should read carefully this entire document, including the annexes and documents incorporated by reference herein, and the other documents referred to herein. For information on how to obtain the documents that are on file with the SEC, see Where You Can Find More Information on page 104.

 

Validus (page 93)

 

Validus is a Bermuda exempted company with its principal executive offices located at 19 Par-La-Ville Road, Hamilton HM11, Bermuda. The telephone number of Validus is (441) 278-9000. Validus is a provider of reinsurance and insurance, conducting its operations worldwide through two wholly-owned subsidiaries, Validus Reinsurance, Ltd. (“Validus Re”) and Talbot Holdings Ltd. (“Talbot”). Validus Re is a Bermuda based reinsurer focused on short-tail lines of reinsurance. Talbot is the Bermuda parent of the specialty insurance group primarily operating within the Lloyd’s insurance market through Syndicate 1183. Validus common shares are traded on the NYSE under the symbol “VR” and, as of May 7, 2009, the last practicable date prior to the filing of this proxy statement, Validus had a market capitalization of approximately $1.76 billion. Validus has approximately 280 employees.

 

As of the date this proxy statement was first mailed to Validus shareholders, Validus was the registered holder of 100 IPC Shares, or less than 1% of the outstanding IPC Shares and Validus was entitled to vote as to all of the IPC Shares it owns.

 

 

IPC (page 93)

 

The following description of IPC is taken from the Registration Statement on Form S-4 filed by IPC with the SEC in connection with the Proposed Max Amalgamation (as amended from time to time, the “IPC/Max S-4”). See Sources of Additional Information above.

 

IPC, a Bermuda exempted company, provides property catastrophe reinsurance and, to a limited extent, property-per-risk excess, aviation (including satellite) and other short-tail reinsurance on a worldwide basis. During 2008, approximately 93% of its gross premiums written, excluding reinstatement premiums, covered property catastrophe reinsurance risks. Property catastrophe reinsurance covers against unpredictable events such as hurricanes, windstorms, hailstorms, earthquakes, volcanic eruptions, fires, industrial explosions, freezes, riots, floods and other man-made or natural disasters. The substantial majority of the reinsurance written by IPCRe, IPC’s Bermuda-based property catastrophe reinsurance subsidiary, has been, and continues to be, written on an excess of loss basis for primary insurers rather than reinsurers, and is subject to aggregate limits on exposure to losses. During 2008, IPC had approximately 258 clients from whom it received either annual/deposit or adjustment premiums, including many of the leading insurance companies around the world. In 2008, approximately 36% of those clients were based in the United States, and approximately 53% of gross premiums written, excluding reinstatement premiums, related primarily to U.S. risks. IPC’s non-U.S. clients and its non-U.S. covered risks are located principally in Europe, Japan, Australia and New Zealand. During 2008, no single ceding insurer accounted for more than 3.7% of its gross premiums written, excluding reinstatement premiums. At December 31, 2008, IPC had total shareholders’ equity of $1,851 million and total assets of $2,389 million.

 

IPC’s common shares are quoted on NASDAQ under the ticker symbol “IPCR” and the Bermuda Stock Exchange under the symbol “IPCR BH.” IPC’s principal executive offices are located at American International Building, 29 Richmond Road, Pembroke HM 08, Bermuda and its telephone number is (441) 298-5100.

The Validus Special Meeting (page 94)

 

The Validus special meeting will be held on June   , 2009, at       , Atlantic time, at the registered office of Validus, located at 19 Par-La-Ville Road, Hamilton HM11, Bermuda. Validus shareholders will be asked at the Validus special meeting:

 

 

You can vote at the Validus special meeting only if you are a shareholder of record, as shown by the transfer books of Validus, at the close of business on          , 2009, which is the record date for the Validus special meeting.

 

The Acquisition (page 45)

 

General Description (page 45)

 

If the Validus Amalgamation Agreement is signed by IPC, and all conditions to the amalgamation have been satisfied or waived, IPC will amalgamate with Validus Ltd., a direct, wholly owned subsidiary of Validus, with the amalgamated company continuing as the surviving company and succeeding to and assuming all of the rights, properties, liabilities and obligations of IPC and Validus Ltd. if the amalgamation is consummated. Upon the closing of the amalgamation, the separate corporate existence of each of IPC and Validus Ltd. will cease and they will continue as an amalgamated company and subsidiary of Validus. The amalgamated company will be named “Validus Ltd.” IPC shareholders (including the shareholders that do not vote in favor of the amalgamation) would have the right to receive 1.2037 Validus Shares and cash in lieu of fractional shares in exchange for each IPC common share they hold, unless they exercise appraisal rights pursuant to Bermuda law.

 

If the Scheme of Arrangement becomes effective, Validus will effect the Acquisition of IPC by the transfer of all outstanding IPC Shares (excluding any IPC Shares beneficially owned by Validus or its subsidiaries or IPC) to Validus in exchange for Validus Shares at a ratio of 1.2037 Validus Shares (together with cash in lieu of the fractional Validus Share interest to which such shareholders would otherwise be entitled) for each IPC Share. IPC would thereby become a wholly-owned subsidiary of Validus.

 

If the Exchange Offer is consummated, each outstanding IPC Share which is validly tendered and not withdrawn before the expiration time of the Exchange Offer will be exchanged for 1.2037 Validus Shares. The Exchange Offer is subject to the condition, among others, that a minimum of 90% of the then outstanding IPC Shares on a fully-diluted basis be tendered (excluding any IPC Shares beneficially owned by Validus, its subsidiaries or IPC). If this condition is satisfied and the Exchange Offer is completed, Validus intends, after completion of the Exchange Offer, to acquire the IPC Shares of those shareholders who choose not to tender their IPC Shares pursuant to the Exchange Offer, in accordance with the Companies Act.

 

Assuming closing of the Acquisition, based on Validus’ capitalization as of December 31, 2008 and the exchange ratio of 1.2037, Validus would issue 67,338,947 Validus Shares in connection with the Acquisition and IPC shareholders would own approximately 43% of the issued and outstanding common shares of Validus on a fully-diluted basis. The Validus Amalgamation Agreement is attached as Annex A to this proxy statement. You should read the Validus Amalgamation Agreement in its entirety because it, and not this proxy statement, is the legal document that would govern the amalgamation.

 

Completing the Acquisition

 

On March 31, 2009, Validus announced that it had delivered to IPC the Validus Amalgamation Offer. In connection with the delivery of the Validus Amalgamation Offer to IPC, Validus also delivered a copy of the Validus Amalgamation Agreement signed by Validus so that, upon a termination of the Max Amalgamation Agreement, IPC would be able to sign Validus Amalgamation Agreement with the certainty of an agreed transaction. IPC announced on April 7, 2009 that its board of directors has determined that the Validus Amalgamation Offer does not constitute a superior proposal to the Proposed Max Amalgamation and reaffirmed its support of the Proposed Max Amalgamation. Additionally, Max has not released IPC from the prohibition in the Max Amalgamation Agreement that prevents IPC from even discussing the Validus Amalgamation Offer with Validus. Therefore, in order to consummate the Acquisition without the cooperation of IPC’s board of directors, Validus is pursuing a three-part plan.

 

First, Validus is asking IPC shareholders to vote “against” the Proposed Max Amalgamation. If the Proposed Max Amalgamation is voted down by IPC shareholders, IPC would be able to terminate the Max Amalgamation Agreement and accept the Validus Amalgamation Offer.

 

Second, Validus intends to commence in the near future the Exchange Offer for all of the outstanding IPC Shares. The Exchange Offer would allow Validus to complete the Acquisition of IPC shortly following the IPC annual general meeting, if the IPC shareholders vote down the Proposed Max Amalgamation and the other conditions to the Exchange Offer are satisfied. Under the terms of the Exchange Offer, IPC shareholders would receive 1.2037 Validus Shares for each IPC Share. The Exchange Offer will be subject to certain conditions described in the Offer to Exchange filed by Validus with the SEC, including the tender of at least 90% of the total outstanding IPC Shares (on a fully diluted basis), termination of the Max Amalgamation Agreement, and the consent of Validus’ lenders. Under Bermuda law, if Validus acquires 90% or more of IPC Shares in the Exchange Offer, Validus will have the right to acquire the remaining IPC Shares in a second-step acquisition under Bermuda law. The Exchange Offer will not be conditioned on regulatory approvals or the elimination of the possible termination fee to Max.

 

Third, Validus intends to petition the Supreme Court of Bermuda to approve the Scheme of Arrangement under which Validus would acquire all IPC Shares under the same economic terms as in the Validus Amalgamation Offer. The Scheme of Arrangement can be accomplished — without the approval of IPC’s board of directors — if approved by IPC shareholders at two shareholder meetings and sanctioned by the Supreme Court of Bermuda. The first shareholder meeting is the court-ordered IPC meeting at which IPC shareholders can vote to approve the Scheme of Arrangement. In addition, if IPC’s board of directors continues to be uncooperative despite shareholder approval at the court-ordered IPC meeting, IPC shareholders can call the IPC special general meeting at which IPC shareholders can require IPC to approve and be bound by the Scheme of Arrangement and to terminate the Max Amalgamation Agreement. Following IPC shareholder approval at both of these meetings, and approval by the Supreme Court of Bermuda, the Scheme of Arrangement would become effective and IPC would become a subsidiary of Validus. The Scheme of Arrangement would be approved with the vote of a majority in number of the holders of IPC Shares voting at the court-ordered IPC meeting, whether in person or by proxy, representing 75% or more in value of the IPC Shares voting at the court-ordered IPC meeting, whether in person or by proxy. The required vote at the second meeting is an affirmative vote of the holders of a majority of IPC Shares voting at the meeting.

 

The Validus Amalgamation Offer, the Exchange Offer and the Scheme of Arrangement are alternative methods for Validus to acquire all of the issued and outstanding IPC Shares on the same economic terms. Ultimately, only one of these transaction structures can be pursued to completion. Validus intends to seek to acquire all IPC Shares by whichever method Validus determines is most effective and efficient.

 

Recommendations of the Validus Board of Directors

 

Validus’ board of directors has adopted the Validus Amalgamation Agreement and authorized and approved the Share Issuance, and deems it fair, advisable and in the best interests of Validus to consummate the Share Issuance, the Acquisition and the other transactions contemplated thereby. Validus’ board of directors

recommends that Validus shareholders vote “FOR” the proposals submitted to Validus shareholders on the attached Validus proxy card.

 

Reasons Why Validus’ Board of Directors Recommends Approval of the Share Issuance (page 67)

 

Validus’ board of directors recommends approval of the Share Issuance in order to issue shares that are necessary to effect the Acquisition. Validus’ board of directors believes that the Acquisition represents a compelling combination and excellent strategic fit that will enable Validus to capitalize on opportunities in the global reinsurance market. The Acquisition would allow IPC shareholders to benefit from the superior growth potential of Validus that would be a leading carrier in Bermuda’s short-tail reinsurance and insurance markets, with a strong balance sheet and quality diversification in profitable business lines.

 

In reaching these conclusions and in determining that the Share Issuance is fair, advisable and in the best interests of Validus, and in recommending the approval of the Share Issuance, Validus’ board of directors consulted with Validus management as well as legal and financial advisors and considered a number of factors. Those factors included, but were not limited to, those set forth under The Acquisition — Reasons Why Validus’ Board of Directors Recommends Approval of the Share Issuance below.

 

Opinion of Validus’ Financial Advisor (page 70)

 

Validus’ board of directors received an oral opinion, subsequently confirmed in writing, from Greenhill & Co., LLC, who we refer to as “Greenhill,” that, based upon and subject to the various limitations and assumptions described in the written opinion, as of March 31, 2009, the exchange ratio pursuant to the Validus Amalgamation Agreement was fair, from a financial point of view, to Validus.

 

The full text of the written opinion of Greenhill, dated March 31, 2009, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limits on the opinion and the review undertaken in connection with rendering the opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference. Validus shareholders are urged to read the opinion in its entirety, but should note that it is not a recommendation as to how Validus shareholders should vote with respect to the issuance of Validus Shares pursuant to the Acquisition or any other matter.

 

Dividends and Distributions (page 78)

 

Each of Validus and IPC regularly pays a quarterly cash dividend. Under the terms of the Validus Amalgamation Agreement, before the amalgamation closes, Validus and IPC would both be permitted to declare and pay ordinary course quarterly dividends on their common shares with record and payment dates consistent with past practice; provided that any such dividend is at a rate no greater than the rate it paid during the fiscal quarter immediately preceding the date of the Validus Amalgamation Agreement, i.e., $0.20 per common share in Validus’ case and $0.22 per common share in IPC’s case.

 

Pursuant to the Validus Amalgamation Agreement, Validus and IPC would agree to coordinate the declaration of, and setting of record dates and payment dates for, dividends on Validus common shares and IPC common shares so that the IPC shareholders do not receive dividends on both the IPC common shares and the Validus Shares received in the amalgamation in respect of any calendar quarter or fail to receive a dividend in respect of any calendar quarter.

 

Anticipated Accounting Treatment (page 78)

 

The Acquisition will be accounted for under the purchase method of accounting in accordance with Statement of Financial Accounting Standards No. 141(R), “Business Combinations” (“FAS 141(R)”), under which the total consideration paid in the Acquisition will be allocated among acquired tangible and intangible assets and assumed liabilities based on the fair values of the tangible and intangible assets acquired and liabilities assumed. In the event there is an excess of the total consideration paid in the Acquisition over the fair values, the excess will be accounted for as goodwill. Intangible assets with definite lives will be amortized over their estimated useful lives. Goodwill resulting from the Acquisition will not be amortized but instead

will be tested for impairment at least annually (more frequently if certain indicators are present). In the event that management of Validus determines that the value of goodwill has become impaired, an accounting charge will be taken in the fiscal quarter in which such determination is made. In the event there is an excess of the fair values of the acquired assets and liabilities assumed over the total consideration paid in the Acquisition, the excess will be accounted in accordance with FAS 141(R). The excess resulting from the Acquisition will be recognized in earnings as a gain attributable to the acquirer on the acquisition date. Validus anticipates the Acquisition will result in an excess of the fair values of the acquired assets and liabilities assumed over the total consideration paid in the Acquisition.

 

The Amalgamation Agreement (page 79)

 

The Validus Amalgamation Agreement is attached as Annex A to this proxy statement. This description of the Validus Amalgamation Agreement assumes that it is signed by IPC in the form delivered by Validus to IPC. You should read the Validus Amalgamation Agreement in its entirety because it, and not this proxy statement, is the legal document that would govern the amalgamation if it were signed by IPC.

 

 

In response to IPC’s rejection of the Validus Amalgamation Offer, Validus is engaging in efforts to move forward with the transaction without IPC’s cooperation. These efforts will necessitate certain changes to the Validus Amalgamation Agreement which are not material to Validus or IPC shareholders. For example, the Validus Amalgamation Agreement contemplates Validus and IPC would cooperate in the preparation and filing of a joint proxy statement/prospectus regarding the amalgamation which would have included soliciting the votes we are seeking by this proxy statement. Certain other provisions regarding timing and process would need to be updated similarly.

 

Amalgamation Consideration (page 80)

 

Under the Validus Amalgamation Agreement, each outstanding IPC Share (including any shares held by IPC shareholders that do not vote in favor of the amalgamation, but excluding any dissenting shares as to which appraisal rights have been exercised pursuant to Bermuda law, and including any shares held by Validus, IPC or any of their respective subsidiaries) will be cancelled and converted into the right to receive 1.2037 Validus Shares upon closing of the amalgamation and cash consideration in lieu of any fractional Validus Shares.

 

Validus will not issue any fractional Validus Shares in connection with the amalgamation. Instead, any IPC shareholder who would otherwise have been entitled to a fraction of a Validus Share in connection with the amalgamation will be paid an amount in cash determined by multiplying such fraction by the average Validus price (such average Validus common share price is determined by valuing Validus common shares based on the volume weighted average price per Validus common share on the NYSE for the five consecutive trading days immediately preceding the second trading day prior to the closing of the amalgamation).

 

Restrictions on Change in Recommendation by the Board of Directors of IPC or Validus (page 86)

 

Pursuant to the Validus Amalgamation Agreement, the boards of directors of IPC or Validus may not withdraw or modify, in any manner adverse to the other party, its recommendations in connection with the amalgamation except if such board has concluded in good faith, after consultation with its outside counsel and financial advisors, that such action is reasonably likely to be required in order for the directors to comply with their fiduciary duties under applicable law, and such party has not materially breached its obligations with respect to changing its recommendation. Before a party can change its recommendation with respect to the amalgamation, it must provide advance written notice of such change to the other party and give the other party five business days to agree to alter the terms and conditions of the Validus Amalgamation Agreement in a manner that removes the need for the applicable board of directors to change its recommendation in order to prevent a breach of its fiduciary duties. Even if IPC or Validus has had a change in recommendation, each will still be required to submit such matters to the respective shareholders’ meeting. See The Amalgamation Agreement — Restrictions on Change in Recommendation by the Boards of Directors of IPC or Validus below.

Restrictions on Solicitation of Acquisition Proposals by IPC (page 86)

 

The Validus Amalgamation Agreement precludes IPC and its subsidiaries and advisors from, directly or indirectly, initiating, soliciting, encouraging or facilitating (including by providing information) any effort or attempt to make or implement any proposal or offer with respect to an amalgamation, reorganization, consolidation, business combination or similar transaction involving it or any of its subsidiaries or any purchase or sale involving 10% or more of its consolidated assets (including, without limitation, shares of its subsidiaries), or 10% or more of its total voting power or the voting power of any of its subsidiaries. There is no “fiduciary duty exception” to this restriction. IPC may withdraw or modify its recommendation as described under The Amalgamation Agreement — Restrictions on Change in Recommendation by the Boards of Directors of IPC or Validus below. See The Amalgamation Agreement — Restrictions on Solicitation of Acquisition Proposals by IPC below.

 

Conditions to the Amalgamation (page 89)

 

Validus’ and IPC’s respective obligations to complete the amalgamation are subject to the fulfillment or waiver (by both Validus and IPC) of certain conditions, including:

 

 

Validus’ obligation to complete the amalgamation is also subject to the fulfillment or waiver (by Validus) of the following condition:

 

 

At any time prior to the effective time of the amalgamation, the parties may, to the extent legally permissible, waive compliance with any of the conditions contained in the Validus Amalgamation Agreement, as described under The Amalgamation Agreement — Amendments and Waivers Under the Amalgamation Agreement below.

Termination of the Amalgamation Agreement (page 90)

 

The Validus Amalgamation Agreement may be terminated, at any time prior to the effective time of the amalgamation, by mutual written consent of IPC and Validus, and, subject to certain limitations described in the Validus Amalgamation Agreement, by either IPC or Validus, if any of the following occurs:

 

 

In addition, Validus may terminate the Validus Amalgamation Agreement if the total number of dissenting IPC Shares for which appraisal rights have been properly exercised in accordance with Bermuda law exceeds 15% of the issued and outstanding IPC Shares on the business day immediately following the last day on which IPC shareholders can require appraisal of their common shares. See The Amalgamation Agreement — Termination of the Amalgamation Agreement.

 

Effects of Termination, Remedies (page 91)

 

If either of the parties terminates the Validus Amalgamation Agreement, the non-terminating party will be required to pay the other a termination fee of $16 million in certain circumstances, as described under The Amalgamation Agreement — Termination of the Amalgamation Agreement — Effects of Termination; Remedies below.

 

Set forth below is certain selected historical consolidated financial data relating to Validus. The financial data has been derived from Validus’ annual report on Form 10-K for the year ended December 31, 2008 (the (“Validus 10-K”). You should not take historical results as necessarily indicative of the results that may be expected for any future period. This financial data should be read in conjunction with the financial statements and the related notes and other financial information contained in the Validus 10-K, which is incorporated by reference into this proxy statement. More comprehensive financial information, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations, ” is contained in the Validus 10-K, and the following summary is qualified in its entirety by reference to the Validus 10-K and all of the financial information and notes contained in the Validus 10-K. See Where You Can Find More Information on page 104.

 

 

The following table sets forth summarized balance sheet data as of December 31, 2008, 2007 and 2006:

 

 

 

NM — Not meaningful

 

 

The following disclosure is taken from IPC’s annual report on Form 10-K for the year ended December 31, 2008, except in respect of diluted book value per common share (as discussed in footnote 5 below). See Sources of Additional Information above.

 

Set forth below is certain selected historical consolidated financial data relating to IPC. The financial data has been derived from IPC’s annual report on Form 10-K for the year ended December 31, 2008. You should not take historical results as necessarily indicative of the results that may be expected for any future period.

 

This financial data should be read in conjunction with the financial statements and the related notes and other financial information contained in IPC’s annual report on Form 10-K for the year ended December 31, 2008, which is incorporated by reference into this proxy statement. More comprehensive financial information, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” is contained in other documents filed by IPC with the SEC, and the following summary is qualified in its entirety by reference to such other documents and all of the financial information and notes contained in those documents. See Where You Can Find More Information on page 104.

 

 

 

 

You should read the following unaudited condensed consolidated pro forma financial information in conjunction with the Validus 10-K and IPC’s annual report on Form 10-K for the year ended December 31, 2008. The following unaudited condensed consolidated pro forma financial information for the year ended December 31, 2008 is intended to provide you with information about how the Acquisition of IPC might have affected the historical financial statements of Validus if the Acquisition had been consummated as of December 31, 2008. For a summary of the proposed business combination contemplated by the Acquisition, see the section of this proxy statement entitled “The Acquisition.” The unaudited condensed consolidated pro forma financial information has been prepared using IPC’s publicly available financial statements and disclosures, without the benefit of inspection of IPC’s books and records. Therefore, certain pro forma adjustments, such as recording fair value of assets and liabilities and adjustments for consistency of accounting policy, are not reflected in these unaudited condensed consolidated pro forma financial statements. The following unaudited condensed consolidated pro forma financial information does not necessarily reflect the financial position or results of operations that would have actually resulted had the Acquisition occurred as of the dates indicated, nor should they be taken as necessarily indicative of the future financial position or results of operations of Validus.

 

The following table presents unaudited condensed consolidated pro forma balance sheet data at December 31, 2008 (expressed in thousands of U.S. dollars, except share and per share data).

 

The following table sets forth unaudited condensed consolidated pro forma results of operations for the year ended December 31, 2008 (expressed in thousands of U.S. dollars, except share and per share data):

 

Validus Holdings, Ltd.

 

Notes To Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share data)

 

 

The unaudited condensed consolidated pro forma financial information gives effect to the proposed Acquisition as if it had occurred at December 31, 2008 for the purposes of the unaudited condensed consolidated pro forma balance sheet and at January 1, 2008 for the purposes of the unaudited condensed consolidated pro forma statement of operations for the year ended December 31, 2008. The unaudited condensed consolidated pro forma financial information has been prepared by Validus’ management and is based on Validus’ historical consolidated financial statements and IPC’s historical consolidated financial statements. Certain amounts from IPC’s historical consolidated financial statements have been reclassified to conform to the Validus presentation. The unaudited condensed consolidated pro forma financial statements have been prepared using IPC’s publicly available financial statements and disclosures, without the benefit of inspection of IPC’s books and records or discussion with the IPC management team. Therefore, certain pro forma adjustments, such as recording fair value of assets and liabilities and adjustments for consistency of accounting policy, are not reflected in these unaudited condensed consolidated pro forma financial statements. Additional reclassifications of IPC data to conform to the Validus presentation may also be required.

 

This unaudited condensed consolidated pro forma financial information is prepared in conformity with US GAAP. The unaudited condensed consolidated pro forma balance sheet as of December 31, 2008 and the unaudited condensed consolidated pro forma statement of operations for the year ended December 31, 2008 have been prepared using the following information:

 

(a) Audited historical consolidated financial statements of Validus as of December 31, 2008 and for the year ended December 31, 2008;

 

(b) Audited historical consolidated financial statements of IPC as of December 31, 2008 and for the year ended December 31, 2008;

 

(c) Such other known supplementary information as considered necessary to reflect the Acquisition in the unaudited condensed consolidated pro forma financial information.

 

The pro forma adjustments reflecting the Acquisition of IPC under the purchase method of accounting are based on certain estimates and assumptions. The unaudited condensed consolidated pro forma adjustments may be revised as additional information becomes available. The actual adjustments upon consummation of the Acquisition and the allocation of the final purchase price of IPC will depend on a number of factors, including additional financial information available at such time, changes in values and changes in IPC’s operating results between the date of preparation of this unaudited condensed consolidated pro forma financial information and the effective date of the Acquisition. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the differences may be material. Validus’ management believes that its assumptions provide a reasonable basis for presenting all of the significant effects of the transactions contemplated based on information available to Validus at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited condensed consolidated pro forma financial information.

 

The unaudited condensed consolidated pro forma financial information does not include any financial benefits, revenue enhancements or operating expense efficiencies arising from the Acquisition. In addition, the unaudited condensed consolidated pro forma financial information does not include any additional expenses that may result from the IPC Acquisition. Estimated costs of the transaction as well as the benefit of the negative goodwill have been reflected in the unaudited condensed consolidated pro forma balance sheets, but have not been included on the pro forma income statement due to their non-recurring nature.

 

The unaudited condensed consolidated pro forma financial information is not intended to reflect the results of operations or the financial position that would have resulted had the Acquisition been effected on

 

Validus Holdings, Ltd.

 

Notes To Unaudited Condensed Consolidated

Pro Forma Financial Statements (unaudited) — (Continued)

 

the dates indicated and if the companies had been managed as one entity. The unaudited condensed consolidated pro forma financial information should be read in conjunction with Validus’ Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission.

 

 

In December 2007, the FASB issued Statement No. 141(R), “Business Combinations” (“FAS 141(R)”) which is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. On April 1, 2009 the FASB finalized and issued FSP FAS 141(R)-1 which amended and clarified FAS 141(R) and is effective for business combinations whose acquisition date is on or after January 1, 2009.

 

FSP FAS 141(R)-1 has amended FAS 141(R)’s guidance on the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets acquired and liabilities assumed in a business combination that arise from contingencies.

 

Significant changes arising from FAS 141(R) and FSP FAS 141(R)-1 and impacting these pro forma financial statements include the determination of the purchase price, treatment of transaction expenses, restructuring costs and negative goodwill as follows:

 

 

 

On March 31, 2009, Validus announced that it delivered an offer letter (the “Offer Letter”) to the Board of Directors of IPC Holdings, Ltd. (“IPC”) pursuant to which Validus and IPC would amalgamate (the “Amalgamation”) in a share-for-share exchange valuing IPC Shares at an 18.0% premium to IPC’s closing market price on March 30, 2009, subject to the terms and conditions set forth in the Offer Letter and in an Agreement and Plan of Amalgamation (the “Amalgamation Agreement”) that was signed by Validus and delivered to IPC with the Offer Letter.

 

Validus proposed an amalgamation with IPC at an exchange ratio of 1.2037 Validus Shares per outstanding IPC Share, providing a value per IPC Share of $29.98 or an 18.0% premium to IPC’s closing share price as of March 30, 2009 (the date immediately preceding the deliverance of the Offer Letter).

 

Validus Holdings, Ltd.

 

Notes To Unaudited Condensed Consolidated

Pro Forma Financial Statements (unaudited) — (Continued)

 

The Board of Directors of Validus has unanimously approved the submission of its offer and the delivery of the signed Amalgamation Agreement so that, upon a termination of IPC’s Agreement and Plan of Amalgamation with Max Capital Group Ltd., dated as of March 1, 2009 and amended as of March 5, 2009 (the “Max Plan of Amalgamation”), IPC will be able to sign the Amalgamation Agreement with the certainty of an agreed transaction. Validus’ offer is structured as a tax-free share-for-share transaction and does not require any external financing. It is not conditioned on due diligence. As of the date of this proxy statement, we have not withdrawn our offer, but have reserved the right to do so.

 

On April 30, 2009, Validus announced a three-part plan to acquire IPC. The three-part plan, involves (1) soliciting IPC shareholders to vote against the Proposed Max Amalgamation, (2) commencing an exchange offer for all IPC Shares and (3) petitioning the Supreme Court of Bermuda to approve a Scheme of Arrangement under Bermuda Law.

In connection with the IPC Acquisition, transaction costs currently estimated at $35,000 will be incurred and expensed. Of this amount, $15,000 relates to Validus expenses as set forth in “The Amalgamation — Sources of Funds, Fees and Expenses” and $20,000 is our estimate of IPC’s expenses based on the IPC/Max S-4. In addition, upon termination of IPC’s Agreement and Plan of Amalgamation with Max Capital Group Ltd., a break-up fee of $50,000 (the ‘Max Termination Fee’) will be incurred and expensed.

 

As discussed above, these pro forma purchase adjustments are based on certain estimates and assumptions made as of the date of the unaudited condensed consolidated pro forma financial information. The actual adjustments will depend on a number of factors, including changes in the estimated fair value of net balance sheet assets and operating results of IPC between December 31, 2008 and the effective date of the Acquisition. Validus expects to make such adjustments at the effective date of the Acquisition. These adjustments are likely to be different from the adjustments made to prepare the unaudited condensed consolidated pro forma financial information and such differences may be material.

 

The share prices for both Validus and IPC used in determining the preliminary estimated purchase price are based on the closing share prices on March 30, 2009 (the date immediately preceding the deliverance of the Offer Letter). The preliminary total purchase price is calculated as follows: