The board of IPC Holdings has urged the company's shareholders to reject the hostile takeover attempt by fellow Bermuda reinsurer Validus in favour of a merger with Max Capital.

IPC said its directors voted unanimously to reiterate their support for amalgamation with Max, which was agreed between the two companies in early March.

And the company added that it believed Validus's efforts to sue over the conditions of the Max agreement, including a "no talk" clause and a $50 million termination fee, were "without merit".

Validus made a $1.6 billion offer for IPC soon after the Max merger agreement was announced. And the class of 2005 reinsurer has claimed its offer will give IPC shareholders a superior deal.

Since the IPC board initially rejected its offer, Validus has said it will go straight to IPC shareholders to urge them to vote against the Max deal.

"The IPC board continues to believe that the combination with Max will result in a stronger and more diversified company with greater potential to create value for IPC shareholders," IPC chairman Kenneth Hammond said in the statement.

"Meanwhile, Validus continues to attempt to acquire IPC at a discount to book value with a proposal that currently values IPC at approximately 82 percent of diluted book value.

"Validus's proposed exchange offer to IPC shareholders would contain the same economic terms as those it proposed to IPC in its March 31, 2009 proposal, which our board carefully considered and determined was not in the best interest of IPC and its shareholders and did not constitute a superior proposal to IPC's amalgamation with Max.

"In addition, we believe our amalgamation with Max is more certain and has a quicker path to closing than any acquisition by Validus."

Mr. Hammond said to agreement to amalgamate with Max had been "the result of a thorough and comprehensive strategic review process that included consideration of many options, and which ruled out Validus, among others".

"Validus's proposal carries substantial execution risk, would take considerably longer to close, is highly conditional and has questionable value-creation potential," Mr. Hammond added.