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Investing.com -- Citizens has downgraded shares of Aspen Insurance Holdings Limited (NYSE:AHL) (AHL) to "market perform" from "market outperform" following the announcement that the company would be acquired by Sompo Holdings for a total consideration of $37.50 per share, amounting to approximately $3.5 billion, entirely in cash.
The downgrade is based on the belief that the market is already fairly discounting the potential outcomes of the acquisition.
The offer represents an approximately 36% premium to the closing price per share of Aspen common stock on August 18, the last trading day before acquisition rumors surfaced.
The price also reflects a 7.5x multiple of 2026E EPS and 1.3x reported book value. The shares are currently trading at only an approximately 3% discount to the acquisition price.
According to the report, while a competing offer is not impossible, the likelihood is considered low due to three factors: the strategic fit with Sompo, the premium being paid, and the all-cash nature of the offer.
The acquisition price also represents a 25% premium to Aspen’s initial public offering price of $30 in June of this year.
The company’s management had been strengthened in the years following its 2019 acquisition by Apollo, and it had exited or divested five reinsurance lines and 12 insurance lines.
These actions led to a strong balance sheet and operating results, allowing for a successful IPO.
The brokerage also mentions that the acquisition is part of a broader trend among Japanese insurers, who are unwinding cross-shareholding agreements, a move that will free up an estimated $60 billion in capital over a multi-year period.