Property casualty insurer AmTrust Financial (NASDAQ: AFSI) rose dramatically after private equity firm Stone Point Capital and the family that controls 43% of the insurer's common shares made an offer to take the company private.
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The proposal by Stone Point Capital values AmTrust at about $2.4 billion and would buy all of the company's common shares for $12.25 each, a roughly 21% premium over the recent share price.
AmTrust announced that the company had formed a special committee to consider the proposal, and that it will not move forward with this (or any other) transaction unless it is approved by this committee. The deal would also have to be approved by its shareholders, excluding the 43% of shares owned by the Karfunkel-Zyskind family, which founded the insurer in 1998.
It's interesting to note that AmTrust's share price rose to more than the offer price after the announcement. As of 11 a.m. EST on the day following the offer to take the company private, AmTrust shares are up 25%, and trade for a $0.37 premium to Stone Point's offer price.
This may indicate that shareholders expect the buyout offer to ultimately increase from its current $12.25 level, or that the market is pricing in the chance of a competing bid coming along.
It would certainly make sense that shareholders expect a bit more than $12.25 in a buyout transaction. After all, the stock was trading upwards of $25 less than a year ago, before a rough 2017 included the announcement that the company had found a series of accounting errors that forced it to restate three years of earnings, among other challenges.
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