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Class action lawyers target $230mn NYMagic buyout

NYMagic's move to go private in a $230mn buyout by ProSight Specialty Insurance Holdings Inc has been challenged by class action lawyers over suggestions the US property casualty insurer may have undersold itself.

The New York-based company said Thursday (15 July) that it had agreed a deal to be bought by private equity-backed ProSight Specialty for $25.75 a share, representing a 23.5 percent premium to the stock's closing price of $20.85 ahead of the announcement.

NYMagic added that shareholders owning around 40 percent of the New York Stock Exchange-listed company had agreed to vote for the take-out.

But a number of securities class action law firms - including Kendall Law Group - have questioned the deal.

Bernstein Liebhard LLP and Wolf Haldenstein Adler Freeman & Herz LLP also said they were "investigating" the proposed acquisition on behalf of shareholders.

In a statement, Kendall Law Group said it was looking to determine whether NYMagic and its board had "breached their fiduciary duties" by entering into the agreement "without properly shopping for a deal that would provide better value for shareholders".

The firm also suggested that although the offer price was at a significant premium to the current share price, shares had traded as high as $23.98 in late April 2010.

Kendall Law added that the reported level of shareholder support for the deal "is not particularly noteworthy, as 39.4 percent of NYMagic shares are held by insiders".

In a similar statement, Bernstein Liebhard LLP said that it was investigating the "potential unfairness" of the offer price to shareholders and the "process by which the NYMagic board of directors considered and approved the transaction".

Meanwhile, Wolf Haldenstein Adler Freeman & Herz said ProSight may be "underpaying for NYMagic, thus unlawfully harming NYMagic shareholders".

For the year ending 31 December 2009, NYMagic reported total revenues of $217.5mn and net profits of $45.5mn.

Headed by founding chief executive Joseph Beneducci, ProSight is backed by Goldman Sachs' private equity arm, GS Capital Partners, along with TPG Capital.

The companies hope the deal will close in the fourth quarter of 2010.

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