/s/  Lorraine Dean

 

This summary highlights the material information in this joint proxy statement/prospectus. To fully understand the proposals, and for a more complete description of the terms of the Amalgamation, you should read carefully this entire document, including the exhibits, 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, please see the section of this joint proxy statement/prospectus entitled “Where You Can Find More Information.”

 

The Companies (page 33)

 

Validus

 

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. 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. As of March 31, 2009, Validus had total shareholders’ equity of $2.023 billion and total assets of $4.763 billion. Validus Shares are traded on the NYSE under the symbol “VR” and, as of August 4, 2009, the last practicable date prior to the filing of this joint proxy statement/prospectus, Validus had a market capitalization of approximately $1.797 billion. Validus has approximately 280 employees.

 

As of the date of the filing of this joint proxy statement/prospectus with the SEC, Validus was the registered holder of 100 IPC Shares, or less than 1% of the outstanding IPC Shares.

 

IPC

 

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 Limited (“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 IPC’s gross premiums written, excluding reinstatement premiums. As of March 31, 2009, IPC had total shareholders’ equity of $1.849 billion and total assets of $2.453 billion.

 

IPC Shares are quoted on the NASDAQ Global Select Market 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 112)

 

The Validus special meeting will be held on [ l ], at [ l ], 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 July 27, 2009, which is the record date for the Validus special meeting.

 

The IPC Special Meeting (page 115)

 

The IPC special meeting will be held on [ l ], 2009, at [ l ], Atlantic Time, at the registered office of IPC, located at the American International Building, 29 Richmond Road, Pembroke, HM 08, Bermuda. IPC shareholders will be asked at the IPC special meeting:

 

 

You can vote at the IPC special meeting only if you are a shareholder of record, as shown on IPC’s register of members or branch register at the close of business on July 27, 2009, which is the record date for the IPC special meeting.

 

The Amalgamation (page 38)

 

General Description (page 38)

 

On July 9, 2009, IPC, Validus and Validus Ltd., a wholly owned subsidiary of Validus, entered into an Agreement and Plan of Amalgamation (the “Amalgamation Agreement”). Validus’ board of directors unanimously adopted the Amalgamation Agreement on that date and deemed it fair, advisable and in the best interests of Validus to enter into the Amalgamation Agreement and to consummate the Share Issuance and the other transactions contemplated thereby. IPC’s board of directors unanimously adopted the Amalgamation Agreement on that date and authorized and approved the amalgamation of IPC with Validus Ltd. upon the terms and subject to the conditions set forth in the Amalgamation Agreement and deemed it fair to, advisable to and in the best interests of IPC to enter into the Amalgamation Agreement and to consummate the Amalgamation and the other transactions contemplated thereby.

 

Subject to shareholder approval as described in this joint proxy statement/prospectus and the satisfaction or waiver of the other conditions specified in the Amalgamation Agreement, on the Closing Date of the Amalgamation, IPC will amalgamate with Validus Ltd. Pursuant to the Amalgamation Agreement, after the effective time of the Amalgamation, IPC shareholders (other than shareholders that exercise appraisal rights pursuant to Bermuda law, and other than Validus and its subsidiaries) will have the right to receive 0.9727 Validus Shares, $7.50 in cash, less any applicable withholding tax and without interest, and cash in lieu of fractional shares (the “amalgamation consideration”) in exchange for each IPC Share they hold.

Further details relating to the structure of the Amalgamation and the amalgamation consideration are described in The Amalgamation Agreement — Structure of the Amalgamation and The Amalgamation Agreement — Amalgamation Consideration.

 

Recommendation of Validus’ Board of Directors (page 118)

 

Validus’ board of directors has adopted the 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 Amalgamation 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.

 

Recommendation of IPC’s Board of Directors (page 119)

 

IPC’s board of directors has adopted the Amalgamation Agreement and authorized and approved the Amalgamation upon the terms and subject to the conditions set forth in the Amalgamation Agreement, authorized and approved the IPC bye-law amendment, and deems it fair, advisable and in the best interests of IPC to enter into the Amalgamation Agreement and to consummate the Amalgamation and the other transactions contemplated by the Amalgamation Agreement. IPC’s board of directors recommends that IPC shareholders vote “FOR” each proposal submitted to IPC shareholders on the attached IPC proxy card.

 

Reasons Why Validus’ Board of Directors Recommends Approval of the Share Issuance (page 59)

 

Validus’ board of directors recommends approval of the Share Issuance in order to issue shares that are necessary to effect the Amalgamation. Validus’ board of directors believes that the Amalgamation represents a compelling combination and excellent strategic fit that will enable Validus to capitalize on opportunities in the global reinsurance market. Successful completion of the Amalgamation would allow Validus shareholders to benefit from the superior growth potential of a combined company 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 Amalgamation — Reasons Why Validus’ Board of Directors Recommends Approval of the Share Issuance.

 

Reasons Why IPC’s Board of Directors Recommends Approval of the Amalgamation and the IPC Bye-Law Amendment (page 62)

 

IPC’s board of directors recommends approval of the Amalgamation and the IPC bye-law amendment based on a number of factors including those described under The Amalgamation — Reasons Why IPC’s Board of Directors Recommends Approval of the Amalgamation and the IPC Bye-law Amendment. IPC’s board of directors believes that each of the Amalgamation and the IPC bye-law amendment is in the best interests of IPC. In making this determination, IPC’s board of directors considered factors including the amount and type of consideration pursuant to the Amalgamation, the certainty for IPC and its shareholders, the anticipated timing of signing and closing, and the other terms and conditions of Validus’ offer.

 

In the course of making the above determinations and recommendations, IPC’s board of directors considered a number of potential benefits of the Amalgamation, which in the aggregate IPC’s board of directors believes supported its decision, including those set forth under The Amalgamation — Reasons Why IPC’s Board of Directors Recommends Approval of the Amalgamation and the IPC Bye-law Amendment.

 

Opinion of Greenhill & Co., LLC, Financial Advisor to Validus’ Board (page 67)

 

Validus’ board of directors received an oral opinion, subsequently confirmed in writing, from Greenhill & Co., LLC (“Greenhill”) that, based upon and subject to the various limitations and assumptions described in the written opinion, as of July 8, 2009, the consideration pursuant to the proposed Amalgamation was fair, from a financial point of view, to Validus.

The full text of the written opinion of Greenhill, dated July 8, 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 C to this joint proxy statement/prospectus 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 Amalgamation Agreement or any other matter.

 

Opinion of J.P. Morgan Securities Inc., Financial Advisor to IPC’s Board (page 74)

 

At the meeting of IPC’s board of directors on July 8, 2009, J.P. Morgan Securities Inc. (“JPMorgan”) rendered its oral opinion, subsequently confirmed in writing, to IPC’s board of directors that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the amalgamation consideration to be paid to the holders of IPC Shares in the proposed Amalgamation was fair, from a financial point of view, to such holders (other than Validus and its affiliates).

 

The full text of the written opinion of JPMorgan, dated July 8, 2009, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex D to this joint proxy statement/prospectus and is incorporated herein by reference. IPC’s shareholders are urged to read the opinion in its entirety. JPMorgan’s written opinion is addressed to IPC’s board of directors, addresses only the fairness, from a financial point of view, to the holders of IPC Shares (other than Validus and its affiliates) of the amalgamation consideration to be paid to such holders of IPC Shares in the proposed Amalgamation and does not constitute a recommendation to any shareholder of IPC as to how such shareholder should vote at the IPC special meeting.

 

Interests of IPC Directors and Executive Officers in the Amalgamation (page 86)

 

In considering the recommendations of IPC’s board of directors that IPC shareholders vote “FOR” the IPC bye-law amendment, and the approval and adoption of the Amalgamation Agreement, IPC shareholders should be aware that John R. Weale, Peter J. A. Cozens, and Stephen F. Fallon, individually, and all the members of IPC’s board of directors as a group, have interests in the Amalgamation that are different from, and/or in addition to, the interests of IPC shareholders generally. As described under The Amalgamation — Interests of IPC Directors and Executive Officers in the Amalgamation, Messrs. Weale, Cozens and Fallon have each entered into an employment agreement with IPC under which they would receive cash severance benefits in the respective amounts of $1,798,500, $1,476,000 and $1,466,750 upon experiencing a termination without “Cause” (as such term is defined in the employment agreements), assuming a termination date of October 1, 2009 following the Amalgamation. Additionally, assuming a termination date of October 1, 2009 following the Amalgamation, the employment agreements provide that Messrs. Weale, Cozens and Fallon would be paid retention bonuses in the amounts of $646,250, $432,000 and $429,000, respectively. Messrs. Weale, Cozens and Fallon and each of IPC’s other officers and directors have rights to indemnification by virtue of their positions as officers and/or directors of IPC. IPC’s board of directors was aware of and considered these differing interests and potential conflicts, among other matters, in evaluating and negotiating the Amalgamation Agreement with Validus and in recommending that the IPC shareholders approve the proposals to be voted upon at the IPC special meeting.

 

The rights of IPC’s executive officers under the applicable employment agreements, and the rights of IPC’s directors and officers to indemnification and the maintenance of directors’ and officers’ liability insurance are described under The Amalgamation — Interests of IPC Directors and Executive Officers in the Amalgamation.

 

Dividends and Distributions (page 90)

 

Each of Validus and IPC regularly pays a quarterly cash dividend, i.e., $0.20 per common share in Validus’ case and $0.22 per common share in IPC’s case. Validus expects to continue to pay its regular quarterly dividends consistent with past practice. Under the terms of the 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 Amalgamation Agreement, i.e., $0.20 per common share in Validus’ case and $0.22 per common share in IPC’s case.

 

Anticipated Accounting Treatment (page 90)

 

The Amalgamation will be accounted for under the purchase method of accounting, with Validus treated as the accounting acquirer, in accordance with Statement of Financial Accounting Standards (“FAS”) No. 141(R), “Business Combinations” (“FAS 141(R)”), under which the total consideration paid in the Amalgamation 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 Amalgamation 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 Amalgamation 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 the 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 Amalgamation, the excess will be accounted for as a gain to be recognized through the income statement at the consummation of the Amalgamation in accordance with FAS 141(R). Validus anticipates the Amalgamation will result in an excess of the fair values of the acquired assets and liabilities assumed over the total consideration paid in the Amalgamation.

 

Material U.S. Federal Income Tax Consequences (page 126)

 

IPC and Validus intend for the Amalgamation to qualify as a reorganization within the meaning of Section 368(a) of the Code, and completion of the Amalgamation is conditioned on Validus and IPC receiving tax opinions to this effect from Cahill Gordon & Reindel llp and Sullivan & Cromwell LLP, respectively. Assuming the Amalgamation so qualifies, a U.S. holder of IPC Shares that exchanges IPC Shares for Validus Shares and cash in the Amalgamation will generally recognize gain (but not loss) in an amount equal to the lesser of (i) the amount of cash received by such U.S. holder in the Amalgamation (excluding any cash received in lieu of a fractional Validus Share) and (ii) the excess, if any, of (a) the sum of the cash and the fair market value of the Validus Shares received by such U.S. holder (including the fair market value of any fractional Validus Share deemed received), over (b) the U.S. holder’s tax basis in the IPC Shares exchanged pursuant to the Amalgamation. Subject to the passive foreign investment company rules or the potential application of Section 1248 of the Code, any gain recognized upon the exchange generally will be capital gain, unless the receipt of cash by a U.S. holder has the effect of the distribution of a dividend for U.S. federal income tax purposes. For more information, please see the section of this joint proxy statement/prospectus under the caption Material U.S. Federal Income Tax Consequences.

 

Tax matters are complicated and the tax consequences of the Amalgamation to you will depend upon the facts of your particular circumstances. Because individual circumstances may differ, Validus urges you to consult with your own tax advisor as to the specific tax consequences of the Amalgamation to you, including the applicability of U.S. federal, state, local, non-U.S. and other tax laws.

 

The Amalgamation Agreement (page 94)

 

The Amalgamation Agreement is attached as Annex A. You should read the Amalgamation Agreement in its entirety because it, and not this joint proxy statement/prospectus, is the legal document that governs the Amalgamation.

 

Amalgamation Consideration (page 94)

 

Under the 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) will be cancelled and converted into the right to receive (i) 0.9727 Validus Shares, (ii) $7.50 in cash, less any applicable withholding taxes and without interest, and (iii) cash in lieu of fractional 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 price of Validus Shares (such average price is determined by valuing Validus Shares based on the volume weighted average price per Validus 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 Boards of Directors of IPC or Validus (page 102)

 

Pursuant to the 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 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. Additionally, IPC must comply with certain additional procedures in order for the board of directors of IPC to change its recommendation as a result of receiving an Acquisition Proposal (as defined in the Amalgamation Agreement) from any third party. Even if IPC or Validus has had a change in recommendation, each will still be required to submit such matters to its respective shareholders’ meeting. See The Amalgamation Agreement — Restrictions on Change in Recommendation by the Boards of Directors of IPC or Validus and Restrictions on Solicitation of Acquisition Proposals by IPC.

 

Restrictions on Solicitation of Acquisition Proposals by IPC (page 102)

 

The 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 shares of its subsidiaries), or 10% or more of its total voting power or the voting power of any of its subsidiaries. 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. See The Amalgamation Agreement — Restrictions on Solicitation of Acquisition Proposals by IPC.

 

Conditions to the Amalgamation (page 106)

 

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:

 

 

 

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 Amalgamation Agreement, as described under The Amalgamation Agreement — Amendments and Waivers Under the Amalgamation Agreement.

 

Termination of the Amalgamation Agreement (page 107)

 

The 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 Amalgamation Agreement, by either IPC or Validus, if any of the following occurs:

 

 

Effects of Termination, Remedies (page 107)

 

If either Validus or IPC terminates the Amalgamation Agreement, a party may be required to pay the other party a termination fee of $16 million in certain circumstances, and IPC will be required to pay Validus an amount equal to $50 million in respect of the termination fee (the “Max Termination Fee”) payable under the Agreement and Plan of Amalgamation among Max Capital Group Ltd. (“Max”), IPC and IPC Limited (the “Max Amalgamation Agreement”), which amount was advanced by Validus on July 9, 2009, in certain circumstances, as described under The Amalgamation Agreement — Termination of the Amalgamation Agreement — Effects of Termination; Remedies and The Amalgamation Agreement — Repayment or Retention of the Reimbursement Amount.

 

Voting Agreements (page 88)

 

In connection with the Amalgamation Agreement, affiliates of Aquiline Capital Partners LLC, Vestar Capital Partners, and New Mountain Capital, LLC, which collectively owned approximately 38% of Validus Shares as of July 27, 2009, have agreed to vote in favor of the issuance of Validus Shares in connection with the Amalgamation. Each of the voting agreements will terminate upon the earlier of: (i) the mutual consent of IPC and a shareholder; (ii) the holding of a duly called meeting of the shareholders of Validus (or an adjournment or postponement thereof) relating to the approval of the issuance of Validus Shares in connection with the Amalgamation at which a shareholder is present and votes its Validus Shares in favor of such issuance; and (iii) the date of termination of the Amalgamation Agreement in accordance with its terms.