The value of small cap stock for Flagstone Reinsurance Holdings SA (NYSE:FSR) soared on Thursday after fellow reinsurer Validus Holdings Ltd. announced it would be acquiring the company for about $600 million in cash and stock to help its property reinsurance division.
According Reuters, the deal follows Validus' unsuccessful attempt to buy Transatlantic Holdings in 2011. Per the terms of the Flagstone deal, Validus will pay $8.43 per Flagstone share – a 19 percent premium to its closing price on Wednesday, August 29. Shareholders with Flagstone will each receive $2 in cash and 0.1935 shares of Validus for every share tendered in the deal.
"The transaction…concludes a lengthy and extensive process in which the Board carefully considered a broad range of strategic alternatives," Flagstone chief executive david Brown said in a statement.
The sale is a part of Flagstone's broader plan to sell non-core businesses, which will allow it to turn its attention to its property and casualty reinsurance wings.
As of 11:30 a.m. on Thursday, August 30, the company's stock was up 19.1 percent to $8.41.