Endurance Specialty Holdings has made a hostile bid to acquire Aspen Insurance Holdings for $3.2 billion after its initial approaches for talks with fellow Bermuda-based re/insurer were rejected.

Endurance announced yesterday that it had made the offer, which amounts to $47.50 per share, to the Aspen board.

John Charman, the chairman and chief executive officer of Endurance, said his company had been trying to talk with the Aspen board since January, but they had “refused to engage with us”.

Aspen responded today by soundly rejecting the offer, describing the proposed merger as “ill-conceived” and a “strategic mismatch”, adding that Aspen’s directors believed it undervalued the company. It also described Endurance’s underwriting track record as “mixed”.

In a written response to the Endurance board, dated April 8, Aspen chairman Glyn Jones and CEO Chris O’Kane accuse Endurance or “orchestrated poaching of Aspen employees” and they add: “Any combination with Endurance’s centralised, top-down management model, as compared to our collaborative, teamwork-oriented culture, would result in extreme personnel disruption and loss of attractive business.”

Aspen said that its board of directors had unanimously rejected the offer “after careful evaluation with the assistance of its financial and legal advisers”.

Yesterday afternoon, Endurance countered, with Mr Charman suggesting that the 21 percent premium on last Friday’s closing price that the offer price represents was “a lot of value to leave on the table”.

“Cut through the rhetoric, and this transaction is all about value and the fact that Aspen shareholders are being denied the opportunity to realise that value,” Mr Charman added.

“We believe shareholders will see the limitations of the Aspen ‘go-it-alone’ plan, which they have been pursuing unsuccessfully, and will recognise the value of the transaction we are proposing — and, in so doing, will make their views known to the Aspen board of directors.”

The Endurance statement added: “The continued refusal by Aspen’s board and management to engage in any discussions with Endurance on behalf of Aspen shareholders demonstrates their entrenched position and is unsurprising in view of their past record of ignoring the best interests of Aspen shareholders.

“Aspen’s ‘rejection’ is simply an attempt to deflect from the highly attractive premium value the Endurance proposal represents by citing a series of unsubstantiated red herring objections.”

Endurance further claimed that “Aspen’s arguments are merely a smokescreen for criticising Endurance, a company that has from its inception, delivered superior growth in book value per share to that of Aspen. Mr Charman likewise has a long and stellar track record of creating tremendous value for investors, and team oriented, entrepreneurial corporate cultures for employees.”

Mr Charman said he was prepared to buy $25 million of Endurance shares with his own money in connection with the deal which will add to the $30 million stake he purchased when he arrived at the company in May last year.

The offer amounts to a 40 percent cash and 60 percent Endurance common shares deal. Outlining the proposal, Endurance stated yesterday that each Aspen shareholder would receive either $47.50 per Aspen share, or all Endurance common shares (0.8826 Endurance shares for each Aspen share), or a combination of cash and Endurance common shares.

The potential combination would create a company with annual gross premiums written of more than $5 billion and shareholders’ equity of $5 billion.

“Despite our repeated attempts since late January to engage in confidential and friendly discussions, Aspen’s Board and management have rebuffed our proposal and refused to engage with us, thereby denying Aspen’s shareholders the ability to understand and attain the clear financial, operational and strategic benefits of this transaction,” Mr Charman said in yesterday morning’s statement.

“We are fully committed to this transaction and are confident that Aspen’s shareholders will recognise the value of our proposal and actively encourage their board to begin constructive discussions with Endurance without delay, with the goal of reaching a negotiated transaction.”

Aspen chairman Glyn Jones said: “After careful review and deliberation, the board of directors unanimously determined that Endurance’s proposal is not in the best interests of Aspen or its shareholders. Endurance’s ill-conceived proposal undervalues our company, represents a strategic mismatch, carries significant execution risk, and would result in substantial dis-synergies.

“Furthermore, most of the consideration to Aspen shareholders would be in a stock that would reflect these problems.

“Aspen has a proven track record of performance and a clear strategy to increase shareholder value. Endurance has a mixed operating track record, new leadership, an unproven strategy, and no experience with large acquisitions. Moreover, this transaction would be highly disruptive to Aspen’s corporate culture, which has proven to be a significant competitive advantage in the marketplace.”

Endurance wants to maintain the headquarters of the proposed combined company in Bermuda, with a significant presence in London, New York and other key markets.

The statement added that it expected the combined company to “generate synergies exceeding $100 million annually”, which would result in significant improvements in return on equity earnings per share in 2015.

“These synergies will include cost savings, underwriting improvements, capital efficiencies and enhanced capital management opportunities,” Endurance stated.

In a letter delivered yesterday morning to the Aspen board, Mr Charman makes it clear that he values Aspen’s leading staff.

“The retention of key members of the Aspen management team, underwriters and employees will be critical to the success of the combined business,” the letter states.

Endurance added: “The cash consideration to be offered to Aspen shareholders will be funded from Endurance’s substantial cash resources and $1.05 billion of newly issued common shares to investors led by funds advised by CVC Capital Partners Advisory (US), Inc and its affiliates, which have already completed due diligence on Endurance and the merits of the transaction, and have provided an equity commitment letter to Endurance.”

In their letter responding to the Endurance offer, Mr Jones and Mr O’Kane added: “It is worth noting that our company is in significant litigation due to your orchestrated poaching of Aspen employees and clear breaches of fiduciary and other duties arising from this. The dis-synergies from the transaction you propose, including loss of business and personnel, combined with Endurance’s unappealing business mix, earnings track record and incompatible culture, make the combination unattractive, particularly in contrast to what Aspen expects to achieve by following our stand-alone plan.”

Aspen also noted that “Endurance has shown a public disdain for Lloyd’s, which is the growth engine of Aspen’s well-established international insurance business”.

And Aspen added: “A combination would burden Aspen with Endurance’s unproven underwriting teams with no clear strategy; an unprofitable insurance business; and a volatile and challenged crop business.”

In arguing the case for the offer, Mr Charman said: “This transaction is, quite simply, a unique opportunity to deliver value to shareholders of both Aspen and Endurance, while creating a new global leader in the industry.

“The proposal offers up-front value for Aspen’s shareholders, who will receive a substantial premium for their shares, as well as the opportunity to participate — along with Endurance’s shareholders — in future value created by a stronger and more profitable company.

“The specialised businesses of Endurance and Aspen, such as Endurance’s market-leading agriculture insurance business and Aspen’s Lloyd’s operations, are highly complementary, and together we will create a company with increased scale, an attractive diversified platform across products and geographies, and greater market presence and relevance.

“The combined company will have a strong balance sheet and capital position, with an enhanced ability to pursue growth opportunities and to withstand volatility. Further, we believe the combined company will enjoy increased profitability driven by a strong management team comprised of industry-leading talent and world-class underwriting expertise from both companies, as well as meaningful transaction synergies.

“Endurance shareholders will also significantly benefit from bringing these two leading companies together. Reflecting my own deep conviction about the future of Endurance and the benefits of the combination, I will purchase $25 million of Endurance common shares in connection with this transaction in addition to the $30 million of personal capital I have already invested in Endurance.”