DEFM14A: Enstar Group Faces Shareholder Vote on $338 Per Share Merger with Sixth Street

Enstar Group Limited is seeking shareholder approval for a merger agreement with Elk Bidco Limited, backed by Sixth Street, offering $338 per share in cash.

Summary

• Enstar Group Limited is holding a special meeting on November 6, 2024, for shareholders to vote on a merger agreement with Elk Bidco Limited, a company backed by Sixth Street.
• The proposal includes merging Company Merger Sub into Enstar, followed by New Company Holdco merging into Enstar, and finally Parent Merger Sub merging into Enstar, resulting in Parent directly owning all Enstar Ordinary Shares.
• Shareholders will receive $338 in cash for each Enstar Ordinary Share they own, while Enstar Preferred Shares will be converted into preferred shares of the surviving company with the same rights and conditions.
• The board of directors unanimously recommends voting in favor of the merger agreement and related proposals.
• Certain existing shareholders, including CEO Dominic Silvester, have entered into rollover and support agreements to vote in favor of the merger.
• The transaction is a going private transaction, and if completed, Enstar will become a privately held company.

Sentiment

Score: 7

Explanation: The document is largely neutral in tone, presenting facts about the proposed merger. The board's recommendation is positive, but the document also outlines potential risks and downsides, resulting in a moderately positive sentiment.

Positives

• Shareholders will receive $338 per share in cash.
• Enstar Preferred Shares will be converted into preferred shares of the surviving company with the same rights and conditions.
• The board of directors unanimously recommends voting in favor of the merger agreement and related proposals.
• Certain existing shareholders have entered into rollover and support agreements to vote in favor of the merger.

Negatives

• If the Mergers are completed, Enstar will become a privately held company and Parent will directly own all of the Enstar Ordinary Shares.
• Holders of Enstar ordinary shares will not own any shares of the Third Surviving Company and holders of Enstar Preferred Shares will hold preferred shares of Enstar as the Third Surviving Company following the Mergers, with all of their relative rights, terms and conditions remaining unchanged.

Risks

• The merger may not be completed.
• Legal proceedings could delay or prevent the merger.
• Executive officers and directors may have interests different from those of shareholders.
• Regulatory approvals are required.
• The company may be required to pay a termination fee under certain circumstances.
• The information made available to the holders of the Companys outstanding notes pursuant to the indentures governing such notes (being quarterly and annual financial reports and current reports (in each case, containing the information that would be required to be filed with the SEC if the Company were required to file such reports, subject to certain exceptions with respect to, among other things, certifications under the Sarbanes-Oxley Act of 2002 and information related to the Companys controls and procedures, corporate governance and executive compensation)) are also expected to be provided to the holders of the Enstar Preferred Shares.

Future Outlook

The parties are working toward consummating the Mergers as quickly as possible and anticipate that the Mergers will be completed by mid-2025, assuming timely receipt of required regulatory clearances and satisfaction or waiver of other closing conditions.

Management Comments

• The Board unanimously recommends that you vote (i) FOR the First Bye-Law Amendment Proposal, (ii) FOR the Second Bye-Law Amendment Proposal, (iii) FOR the Merger Proposal, (iv) FOR the Merger-Related Compensation Proposal and (v) FOR the Adjournment Proposal.

Industry Context

The announcement reflects ongoing consolidation and private equity interest in the (re)insurance sector, particularly in companies managing legacy or run-off portfolios.

Comparison to Industry Standards

• The $338 per share offer represents a premium of approximately 8.5% relative to the 90-day volume-weighted average price of Enstar Ordinary Shares and 6.9% of the 60-day volume-weighted average price of Enstar Ordinary Shares, in each case, as of July 26, 2024.
• Goldman Sachs delivered its opinion to the Board that, as of July 29, 2024 and based upon and subject to the factors and assumptions set forth therein, the Total Cash Consideration to be paid per Enstar Ordinary Share to the holders of Enstar Ordinary Shares (other than Parent and its affiliates and the holders of Reinvesting Shares) pursuant to the Merger Agreement was fair from a financial point of view to such holders.

Legal Proceedings

• As of the date of this Proxy Statement, there are no pending lawsuits challenging the Mergers and the Company has received several demand letters from purported Enstar shareholders alleging deficiencies and/or omissions in the preliminary Proxy Statement the Company filed on September 4, 2024.

Related Party Transactions

• Mr. Silvester, Chief Executive Officer of the Company (the CEO), entered into a Rollover and Support Agreement (the Support Agreement) with Elk Evergreen, Elk Cypress, and the indirect sole owner of Parent (Topco), pursuant to which, among other things, the CEO Filing Party has agreed to support the Transactions and vote in favor of the matters to be submitted to Enstar shareholders in connection with the Mergers, including the adoption of the Merger Agreement, and against any Acquisition Proposal.
• Also pursuant to the Support Agreement, the CEO Filing Party has agreed to contribute certain Enstar Ordinary Shares he beneficially owns in exchange for certain non-voting equity interests of TopCo (the Reinvestment).

Stakeholder Impact

• Shareholders will receive $338 per share in cash or preferred shares of the surviving company.
• Executive officers may receive severance payments and benefits.
• Enstar will become a privately held company.

Next Steps

• Enstar shareholders will vote on the merger agreement at the special meeting on November 6, 2024.
• The parties must obtain required regulatory approvals.
• If approved and all conditions are met, the merger is expected to close by mid-2025.

Key Dates

Keywords

merger, Enstar, shareholders, Sixth Street, Elk Bidco, ordinary shares, preferred shares, agreement, vote, proposal