Filed by Validus Holdings, Ltd. pursuant to Rule 425

under the Securities Act of 1933, as amended,

and deemed filed pursuant to Rule 14a-12

under the Securities Exchange of 1934, as amended

 

Subject Company: IPC Holdings, Ltd.

(Commission File No.: 000-27662)

 

 

 

May 19, 2009

 

VALIDUS’ SUPERIOR OFFER JUST GOT BETTER

 

PRESERVE YOUR RIGHT TO RECEIVE VALIDUS’ INCREASED OFFER — VOTE
“AGAINST” THE PROPOSED MAX AMALGAMATION ON THE GOLD PROXY CARD TODAY

 

Dear IPC Shareholder,

 

As you may know, Validus Holdings, Ltd. (“Validus”) has increased its offer for IPC Holdings, Ltd. (“IPC”) to provide even greater value to IPC shareholders. You will now receive $3.00 in cash and 1.1234 Validus voting common shares for each IPC common share that you hold. The increased offer provides IPC shareholders with total consideration of $30.14 per IPC share based on Validus’ closing price on Friday, May 15, 2009, a 13.2% premium to IPC’s closing price that day and a 21.9% premium based on IPC’s and Validus’ closing prices on March 30, 2009, the last trading day before the announcement of Validus’ initial offer. Under Validus’ initial offer, IPC shareholders would have received 1.2037 Validus voting common shares, and no cash, for each IPC common share. In addition, you will have the continued opportunity to benefit from being part of a leading Bermuda carrier in the short-tail reinsurance and insurance market with a global underwriting platform.

 

IPC shareholders should look at the facts and compare Validus’ increased offer with the proposed Max amalgamation.

 

THE VALIDUS OFFER IS CLEARLY SUPERIOR

 

 

 

 

Despite the IPC Board of Directors repeated attempts to deny you the opportunity to receive the greater value provided by the Validus offer, we hope that it will do the right thing and support our increased offer. Nevertheless, the future of your investment is in your hands. We urge you to vote AGAINST the proposed Max amalgamation in order to preserve your right to receive Validus’ superior offer.

 

DON’T BE FOOLED BY IPC — VALIDUS CAN PROMPTLY CLOSE A TRANSACTION
IF YOU VOTE DOWN THE PROPOSED MAX AMALGAMATION

 

 

IPC SHAREHOLDERS GET A BETTER DEAL WITH VALIDUS —
AND HAVE A CLEAR WAY TO OBTAIN IT

 

Even without the support of IPC’s Board, Validus has a clear plan to a timely closing of its acquisition of IPC through its Exchange Offer and Scheme of Arrangement. But IPC shareholders must first vote “AGAINST” the proposed Max amalgamation to receive the superior economics and value of the Validus offer.

 

REJECT THE MAX AMALGAMATION: VOTE YOUR GOLD PROXY CARD TODAY

 

If your IPC shares are held in your own name, please vote “AGAINST” Proposal #8, which is seeking your approval for the issuance of IPC shares in connection with the proposed Max amalgamation by signing, dating and returning the enclosed GOLD proxy card in the postage-paid envelope we have provided. This preserves your right to receive the benefits of the Validus offer. If you hold your IPC shares in “street name” with a bank, brokerage firm, dealer, trust company or other nominee, only they can exercise your right to vote with respect to your shares and only after receiving your specific instructions. IT IS CRITICAL THAT YOU PROMPTLY GIVE INSTRUCTIONS TO YOUR BANK, BROKERAGE FIRM, DEALER, TRUST COMPANY OR OTHER NOMINEE TO ENSURE THAT A GOLD PROXY CARD IS SUBMITTED ON YOUR BEHALF. Please follow the instructions to authorize a proxy to vote on the enclosed GOLD proxy card. If your bank, brokerage firm, dealer, trust company or other nominee provides for voting instructions to be delivered to them by Internet or telephone, instructions are included with the enclosed GOLD proxy card. We urge you to confirm in writing your instructions to the person responsible for your account and to provide a copy of those instructions to us, care of Georgeson Inc., at 199 Water Street, 26th Floor, New York, New York 10038, or by facsimile at (212) 440-9009, or by email at validusIPC@georgeson.com so that we may be aware of all instructions given and are in a position to ensure that your instructions are followed.

 

We urge you not to return any white proxy card you may receive from IPC or otherwise authorize a proxy to vote your shares for the proposed Max amalgamation. If you have already returned a white proxy card to IPC or otherwise authorized a proxy to vote your shares for the proposed Max amalgamation, it is not too late to change your vote. To revoke your prior proxy and change your vote, simply sign and date the enclosed GOLD proxy card and return it in the postage-paid envelope provided. Remember, only your latest dated proxy will be counted.

IPC shareholders of record as of April 28, 2009 are entitled to vote at the annual meeting. If you were an IPC holder on such date, you can still vote even if you have since sold your shares.

 

We have included in an Annex certain additional information in connection with Validus’ solicitation in opposition to the proposed Max amalgamation, including pro forma financial information relating to the acquisition of IPC by Validus which has been updated to reflect both Validus’ increased offer for IPC and the quarterly financial information for Validus and IPC for the three months ended March 31, 2009.

 

Georgeson Inc. is assisting Validus with its efforts to solicit proxies. If you have any questions about voting your IPC shares, please call Georgeson Inc. toll-free at (888) 274-5119 (banks and brokerage firms should call (212) 440-9800), or email validusIPC@georgeson.com.

 

Your vote is extremely important, regardless of how many or how few shares you own. To ensure your vote is counted, submit your vote on the GOLD proxy card so we receive it on or before June 12, 2009, the date of IPC’s annual meeting.

 

We thank you for your consideration and support.

 

Sincerely,

 

Edward J. Noonan

Chairman and Chief Executive Officer

Validus Holdings, Ltd.

 

Cautionary Note Regarding Forward-Looking Statements

 

This letter may include forward-looking statements, both with respect to us and our industry, that reflect our current views with respect to future events and financial performance. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “will,” “may” and similar statements of a future or forward-looking nature identify forward-looking statements. All forward-looking statements address matters that involve risks and uncertainties, many of which are beyond our control. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements. We believe that these factors include, but are not limited to, the following: 1) uncertainty as to whether Validus will be able to enter into and to consummate the proposed acquisition on the terms set forth in the improved Validus amalgamation offer; 2) uncertainty as to the actual premium that will be realized by IPC shareholders in connection with the proposed acquisition; 3) uncertainty as to the long-term value of Validus common shares; 4) unpredictability and severity of catastrophic events; 5) rating agency actions; 6) adequacy of Validus’ or IPC’s risk management and loss limitation methods; 7) cyclicality of demand and pricing in the insurance and reinsurance markets; 8) Validus’ limited operating history; 9) Validus’ ability to implement its business strategy during “soft” as well as “hard” markets; 10) adequacy of Validus’ or IPC’s loss reserves; 11) continued availability of capital and financing; 12) retention of key personnel; 13) competition; 14) potential loss of business from one or more major insurance or reinsurance brokers; 15) Validus’ or IPC’s ability to implement, successfully and on a timely basis, complex infrastructure, distribution capabilities, systems, procedures and internal controls, and to develop accurate actuarial data to support the business and regulatory and reporting requirements; 16) general economic and market conditions (including inflation, volatility in the credit and capital markets, interest rates and foreign currency exchange rates); 17) the integration of Talbot or other businesses we may acquire or new business ventures we may start; 18) the effect on Validus’ or IPC’s investment portfolios of changing financial market conditions including inflation, interest rates, liquidity and other factors; 19) acts of terrorism or outbreak of war; 20) availability of reinsurance and retrocessional coverage; 21) failure to realize the anticipated benefits of the proposed acquisition, including as a result of failure or delay in integrating the

businesses of Validus and IPC; and 22) the outcome of litigation arising from the Validus Offer for IPC, as well as management’s response to any of the aforementioned factors.

 

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the risk factors included in our most recent reports on Form 10-K and Form 10-Q and the risk factors included in IPC’s most recent reports on Form 10-K and Form 10-Q and other documents of Validus and IPC on file with the Securities and Exchange Commission (“SEC”). Any forward-looking statements made in this letter are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Validus will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. Except as required by law, we undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

 

Additional Information about the Proposed Acquisition and Where to Find It:

 

This letter relates to the Exchange Offer by Validus to exchange each issued and outstanding common share of IPC for 1.1234 voting common shares of Validus and $3.00 in cash. This letter is for informational purposes only and does not constitute an offer to exchange, or a solicitation of an offer to exchange, IPC common shares, nor is it a substitute for the Tender Offer Statement on Schedule TO or the preliminary prospectus/offer to exchange included in the Registration Statement on Form S-4 (including the letter of transmittal and related documents and as amended and supplemented from time to time, the “Exchange Offer Documents”) that Validus has filed or may file with the SEC. The Registration Statement has not yet become effective. The Exchange Offer will be made only through the Exchange Offer Documents.

 

This letter is not a substitute for the proxy statements that Validus has filed or may file with the SEC or any other documents which Validus may send to its or IPC’s shareholders in connection with the proposed acquisition, including the definitive proxy statement seeking proxies to oppose the issuance of IPC shares in connection with the amalgamation agreement between IPC and Max (the “Opposition Proxy Statement”) sent by Validus to IPC shareholders. Validus has also filed a preliminary proxy statement with the SEC seeking proxies to approve the issuance of Validus voting common shares in connection with the proposed transaction between IPC and Validus (the “Validus Share Issuance Proxy Statement”). In addition, Validus has filed preliminary proxy statements with the SEC in connection with the Scheme of Arrangement (the “Scheme of Arrangement Proxy Statements”).

 

INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE EXCHANGE OFFER DOCUMENTS, THE OPPOSITION PROXY STATEMENT, THE VALIDUS SHARE ISSUANCE PROXY STATEMENT, THE SCHEME OF ARRANGEMENT PROXY STATEMENTS AND ANY OTHER PROXY STATEMENTS OR RELEVANT DOCUMENTS THAT VALIDUS HAS FILED OR MAY FILE WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION. All such documents, when filed, are available free of charge at the SEC’s website (www.sec.gov) or by directing a request to Validus through Jon Levenson, Senior Vice President, at +1-441-278-9000.

 

Participants in the Solicitation:

 

Validus and certain of its executive officers are deemed to be participants in any solicitation of shareholders in connection with the proposed acquisition. Information about Validus’ executive officers is available in Validus’ proxy statement, dated March 25, 2009 for its 2009 annual general meeting of shareholders.

Annex

 

Additional Information

 

The additional information set forth below amends and supplements the definitive proxy statement of Validus Holdings, Ltd. (“Validus”) filed with the Securities and Exchange Commission (the “SEC”) on May 8, 2009 (the “proxy statement”), in connection with the solicitation of proxies in opposition to the issuance of IPC Shares under the Proposed Max Amalgamation contemplated by the Agreement and Plan of Amalgamation, dated as of March 1, 2009, as amended on March 5, 2009, among IPC Holdings, Ltd. (“IPC”), Max Capital Group Ltd. (“Max”) and IPC Limited (the “Max Amalgamation Agreement”). Capitalized terms used herein and not otherwise defined shall have the same meaning as the terms used in the proxy statement.

 

The additional information set forth below includes financial and other information that updates information in the proxy statement. You should carefully consider the additional information set forth below in conjunction with the information in the proxy statement.

 

Additional Background Information

 

On May 12, 2009, Validus filed three preliminary proxy statements with the SEC related to the Scheme of Arrangement pursuant to which Validus would acquire all of the outstanding IPC Shares on the same economic terms as Validus’ proposed amalgamation offer which was publicly announced on March 31, 2009 (the “Initial Validus Amalgamation Offer”). Validus filed the three preliminary proxy statements with the SEC to, respectively, (i) solicit votes from IPC shareholders to approve the Scheme of Arrangement at a court-ordered IPC meeting, (ii) solicit requisitions from IPC shareholders to compel the board of directors of IPC to call the IPC special general meeting and (iii) solicit votes to approve certain proposals at the IPC special general meeting. On May 14, 2009, Validus filed an application to the Supreme Court of Bermuda to convene a court-ordered meeting of IPC shareholders to approve the Scheme of Arrangement. On May 19, 2009, the Court directed that Validus’ application be heard during the week of May 25, 2009.

 

On May 12, 2009, Validus also commenced an exchange offer for all of the outstanding IPC Shares on the same economic terms as the Initial Validus Amalgamation Offer and the Scheme of Arrangement (the “Exchange Offer”). On May 14, 2009, IPC filed with the SEC a Schedule 14D-9 in response to the Exchange Offer stating IPC’s board of directors’ recommendation that IPC’s shareholders reject the Exchange Offer and not tender their IPC Shares to Validus pursuant to the Exchange Offer.

 

On May 13, 2009, the Supreme Court of Bermuda denied Validus’ application to expedite the trial of Validus’ claim challenging the validity of the $50 million Max Termination Fee in the Max Amalgamation Agreement and the provisions therein which restrict the ability of IPC to discuss competing proposals with third parties.

 

On May 18, 2009, Validus delivered an increased offer to the IPC board of directors for the amalgamation of Validus and IPC. Under the increased offer, IPC shareholders will now receive $3.00 in cash and 1.1234 Validus Shares for each outstanding IPC Share. In connection with the offer letter, Validus delivered to IPC a proposed amendment to the Validus Agreement. Under the terms of the proposed amendment, among other matters, (i) the per share consideration to be paid to the holders of IPC Shares includes the revised exchange ratio and the addition of $3.00 in cash, less any applicable withholding taxes and without interest, (ii) IPC is permitted to declare and pay a one-time dividend to the holders of its shares in an aggregate amount not to exceed any reduction in the Max Termination Fee and (iii) IPC and its subsidiaries and their respective personnel and representatives may, if IPC’s board of directors concludes in good faith that such action is required in order for IPC’s directors to comply with fiduciary duties under applicable law, and if IPC complies with certain notification and confidentiality requirements, participate or otherwise engage in discussions with or provide confidential information or data relating to an acquisition proposal for IPC. On May 18, 2009, Validus also announced that it was amending the Exchange Offer and Scheme of Arrangement to reflect the increased amalgamation offer made to IPC.

 

On May 18, 2009, IPC issued a press release stating that it would, along with its legal and financial advisors, carefully review Validus’ revised amalgamation offer.

Unaudited Condensed Consolidated Pro Forma Financial Information

 

The following unaudited condensed consolidated pro forma financial information is intended to provide you with information about how the acquisition of IPC might have affected the historical financial statements of Validus if it had been consummated at an earlier time. The unaudited condensed consolidated pro forma financial information has been prepared using IPC’s publicly available financial statements and disclosures, without the benefit of inspection of IPC’s books and records. Therefore, certain pro forma adjustments, such as recording fair value of assets and liabilities and adjustments for consistency of accounting policy, are not reflected in these unaudited condensed consolidated pro forma financial statements. The following unaudited condensed consolidated pro forma financial information does not necessarily reflect the financial position or results of operations that would have actually resulted had the acquisition occurred as of the dates indicated, nor should they be taken as necessarily indicative of the future financial position or results of operations of Validus.

 

The unaudited condensed consolidated pro forma financial information should be read in conjunction with Validus’ annual report on Form 10-K for the year ended December 31, 2008, Validus’ quarterly report on Form 10-Q for the three months ended March 31, 2009, IPC’s annual report on Form 10-K for the year ended December 31, 2008 and IPC’s quarterly report on Form 10-Q for the three months ended March 31, 2009, each as filed with the SEC. The unaudited condensed consolidated pro forma financial information gives effect to the proposed acquisition as if it had occurred at March 31, 2009 for the purposes of the unaudited consolidated pro forma balance sheet and at January 1, 2008 for the purposes of the unaudited condensed consolidated pro forma statements of operations for the year ended December 31, 2008 and the three months ended March 31, 2009.

 

The unaudited condensed consolidated pro forma financial information relates to the acquisition by Validus of all of the issued and outstanding IPC Shares (the “Acquisition”) pursuant to the Validus Agreement (as amended on May 18, 2009), the Exchange Offer and subsequent second-step acquisition, the Scheme of Arrangement or otherwise for per share consideration equal to 1.1234 Validus Shares and $3.00 in cash (less any applicable withholding taxes and without interest).

The following table presents unaudited condensed consolidated pro forma balance sheet data at March 31, 2009 (expressed in thousands of U.S. dollars, except share and per share data) giving effect to the Acquisition as if it had occurred at March 31, 2009.

 

The following table sets forth unaudited condensed consolidated pro forma results of operations for the year ended December 31, 2008 (expressed in thousands of U.S. dollars, except share and per share data) giving effect to the Acquisition as if it had occurred at January 1, 2008:

 

The following table sets forth unaudited condensed consolidated pro forma results of operations for the three months ended March 31, 2009 (expressed in thousands of U.S. dollars, except share and per share data) giving effect to the Acquisition as if it had occurred at January 1, 2008:

 

Validus Holdings, Ltd.

 

Notes To Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share data)

 

 

The unaudited condensed consolidated pro forma financial information gives effect to the Acquisition as if it had occurred at March 31, 2009 for the purposes of the unaudited condensed consolidated pro forma balance sheet and at January 1, 2008 for the purposes of the unaudited condensed consolidated pro forma statements of operations for the year ended December 31, 2008 and three months ended March 31, 2009. The unaudited condensed consolidated pro forma financial information has been prepared by Validus’ management and is based on Validus’ historical consolidated financial statements and IPC’s historical consolidated financial statements. Certain amounts from IPC’s historical consolidated financial statements have been reclassified to conform to the Validus presentation. The unaudited condensed consolidated pro forma financial statements have been prepared using IPC’s publicly available financial statements and disclosures, without the benefit of inspection of IPC’s books and records or discussion with the IPC management team. Therefore, certain pro forma adjustments, such as recording fair value of assets and liabilities and adjustments for consistency of accounting policy, are not reflected in these unaudited condensed consolidated pro forma financial statements. Additional reclassifications of IPC data to conform to the Validus presentation may also be required.

 

This unaudited condensed consolidated pro forma financial information is prepared in conformity with US GAAP. The unaudited condensed consolidated pro forma balance sheet as of March 31, 2009 and the unaudited condensed consolidated pro forma statements of operations for the year ended December 31, 2008 and the three months ended March 31, 2009 have been prepared using the following information:

 

(a) Audited historical consolidated financial statements of Validus as of December 31, 2008 and for the year ended December 31, 2008;

 

(b) Audited historical consolidated financial statements of IPC as of December 31, 2008 and for the year ended December 31, 2008;

 

(c) Unaudited historical consolidated financial statements of Validus as of March 31, 2009 and for the three months ended March 31, 2009;

 

(d) Unaudited historical consolidated financial statements of IPC as of March 31, 2009 and for the three months ended March 31, 2009;

 

(e) Such other known supplementary information as considered necessary to reflect the Acquisition in the unaudited condensed consolidated pro forma financial information.

 

The pro forma adjustments reflecting the Acquisition of IPC under the purchase method of accounting are based on certain estimates and assumptions. The unaudited condensed consolidated pro forma adjustments may be revised as additional information becomes available. The actual adjustments upon consummation of the Acquisition and the allocation of the final purchase price of IPC will depend on a number of factors, including additional financial information available at such time, changes in values and changes in IPC’s operating results between the date of preparation of this unaudited condensed consolidated pro forma financial information and the effective date of the Acquisition. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the differences may be material. Validus’ management believes that its assumptions provide a reasonable basis for presenting all of the significant effects of the transactions contemplated based on information available to Validus at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited condensed consolidated pro forma financial information.

 

The unaudited condensed consolidated pro forma financial information does not include any financial benefits, revenue enhancements or operating expense efficiencies arising from the Acquisition. In addition, the unaudited condensed consolidated pro forma financial information does not include any additional expenses that may result from the IPC Acquisition. Estimated costs of the transaction as well as the benefit of the negative goodwill have

 

Validus Holdings, Ltd.

 

Notes To Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) — (Continued)

(Expressed in thousands of U.S. dollars, except share and per share data)

 

been reflected in the unaudited condensed consolidated pro forma balance sheets, but have not been included on the pro forma income statement due to their non-recurring nature.

 

The unaudited condensed consolidated pro forma financial information is not intended to reflect the results of operations or the financial position that would have resulted had the Acquisition been effected on the dates indicated and if the companies had been managed as one entity. The unaudited condensed consolidated pro forma financial information should be read in conjunction with Validus’ annual report on Form 10-K for the year ended December 31, 2008, Validus’ quarterly report on Form 10-Q for the three months ended March 31, 2009, IPC’s annual report on Form 10-K for the year ended December 31, 2008 and IPC’s quarterly report on Form 10-Q for the three months ended March 31, 2009, each as filed with the SEC.

 

 

In December 2007, the FASB issued Statement No. 141(R), “Business Combinations” (“FAS 141(R)”) and No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (“FAS 160”) which are effective for business combinations for which the Acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. On April 1, 2009 the FASB finalized and issued FSP FAS 141(R)-1 which amended and clarified FAS 141 (R) and is effective for business combinations whose Acquisition date is on or after January 1, 2009.

 

FSP FAS 141(R)-1 has amended FAS 141(R)’s guidance on the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets acquired and liabilities assumed in a business combination that arise from contingencies.

 

Significant changes arising from FAS 141 (R) and FSP FAS 141(R)-1 which will impact any future acquisitions include the determination of the purchase price and treatment of transaction expenses, restructuring charges and negative goodwill as follows:

 

 

Validus Holdings, Ltd.

 

Notes To Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) — (Continued)

(Expressed in thousands of U.S. dollars, except share and per share data)

 

 

 

On April 30, 2009, Validus announced a three-part plan to acquire IPC. The three-part plan, involves (1) soliciting IPC shareholders to vote against the Proposed Max Amalgamation, (2) commencing an Exchange Offer for all IPC Shares (followed by a second-step acquisition pursuant to Section 102 or 103 of the Companies Act) and (3) petitioning the Supreme Court of Bermuda to approve a Scheme of Arrangement under Bermuda law. If the Acquisition is consummated, former IPC shareholders will no longer have any ownership interest in IPC and will be shareholders of Validus. Validus intends, promptly following the Scheme of Arrangement or Exchange Offer and the second-step acquisition, to amalgamate IPC with a newly-formed, wholly-owned subsidiary of Validus in accordance with Section 107 of the Companies Act.

 

On May 18, 2009, Validus announced that it delivered an improved offer to the Board of Directors of IPC for the amalgamation of Validus and IPC. Under the improved offer, IPC shareholders will receive $3.00 in cash and 1.1234 Validus Shares for each IPC Share. The improved offer provides IPC shareholders with a total consideration of $30.14 per IPC share based on Validus’ closing price on May 15, 2009.

 

In connection with the Acquisition, transaction costs currently estimated at $40,000 will be incurred and expensed. Of this amount, $20,000 relates to Validus expenses and $20,000 is our estimate of IPC’s expenses based on the IPC/Max S-4. In addition, upon termination of the Max Amalgamation Agreement, the Max Termination Fee will be incurred and expensed. The data in the following sentence is taken from “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in IPC’s Quarterly Report on Form 10-Q for the three months ended March 31, 2009, where such disclosure was not made in “thousands of U.S. dollars,” and the data has been reproduced here as it was originally presented. Approximately $13.8 million of expenses, including legal and financial advisory services, were associated with IPC’s strategic initiatives designed to increase shareholder value and which resulted in the Agreement and Plan of Amalgamation with Max. Therefore, Validus is estimating that approximately $13,800 of the estimated $40,000 total transaction costs have been incurred and expensed by IPC in the three months ended March 31, 2009.

 

As discussed above, these pro forma purchase adjustments are based on certain estimates and assumptions made as of the date of the unaudited condensed consolidated pro forma financial information. The actual adjustments will depend on a number of factors, including changes in the estimated fair value of net balance sheet assets and operating results of IPC between March 31, 2009 and the effective date of the Acquisition. Validus expects to make such adjustments at the effective date of the Acquisition. These adjustments are likely to be different from the adjustments made to prepare the unaudited condensed consolidated pro forma financial information and such differences may be material.

 

Validus Holdings, Ltd.

 

Notes To Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) — (Continued)

(Expressed in thousands of U.S. dollars, except share and per share data)

 

The share prices for both Validus and IPC used in determining the preliminary estimated purchase price are based on the closing share prices on May 15, 2009 (the date immediately preceding the filing of this proxy statement). The preliminary total purchase price is calculated as follows:

 

 

The allocation of the purchase price is as follows:

 

 

 

Validus Holdings, Ltd.

 

Notes To Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) — (Continued)

(Expressed in thousands of U.S. dollars, except share and per share data)

 

 

 

Validus Holdings, Ltd.

 

Notes To Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) — (Continued)

(Expressed in thousands of U.S. dollars, except share and per share data)

 

 

The IPC amalgamation will result in the payment of cash and cash equivalents by IPC of $56,200 and by Validus of $189,506.

 

The unaudited condensed consolidated pro forma statements of operations reflect the impact of these reductions in cash and cash equivalents. Actual transaction costs may vary from such estimates which are based on the best information available at the time the unaudited condensed consolidated pro forma financial information was prepared.

 

For purposes of presentation in the unaudited condensed consolidated pro forma financial information, the sources and uses of funds of the acquisition are as follows:

 

 

 

IPC did not disclose gross premiums written by class of business in its Quarterly Report on Form 10-Q for the three months ended March 31, 2009. Therefore, a table of gross premiums written by Validus, IPC and pro forma combined cannot be presented.

 

Validus Holdings, Ltd.

 

Notes To Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) — (Continued)

(Expressed in thousands of U.S. dollars, except share and per share data)

 

 

The following table sets forth the gross premiums written for the year ended December 31, 2008 by Validus, IPC and pro forma combined:

 

 

 

 

Validus Holdings, Ltd.

 

Notes To Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) — (Continued)

(Expressed in thousands of U.S. dollars, except share and per share data)

 

 

Selected ratios of Validus, IPC and pro forma combined are as follows:

 

 

 

Validus Holdings, Ltd.

 

Notes To Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) — (Continued)

(Expressed in thousands of U.S. dollars, except share and per share data)

 

 

 

Validus Holdings, Ltd.

 

Notes To Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) — (Continued)

(Expressed in thousands of U.S. dollars, except share and per share data)

 

 

(a) Pro forma earnings per common share for the year ended December 31, 2008 and the three months ended March 31, 2009 have been calculated based on the estimated weighted average number of common shares outstanding on a pro forma basis, as described in 7(b) below. The historical weighted average number of common shares outstanding of Validus was 74,677,903 and 75,819,413 basic and diluted, respectively, for the year ended December 31, 2008 and 75,744,577 and 79,102,643 basic and diluted, respectively, for the three months ended March 31, 2009.

 

(b) The pro forma weighted average number of common shares outstanding for the year ended December 31, 2008 and three months ended March 31, 2009, after giving effect to the exchange of shares as if the Exchange Offer had been issued and outstanding for the whole year, is 137,530,809 and 139,293,647, basic and diluted, and 138,597,483 and 142,576,877, basic and diluted, respectively.

 

(c) In the basic earnings per share calculation, dividends and distributions declared on warrants are deducted from net income. In calculating diluted earnings per share, we consider the application of the treasury stock method and the two-class method and which ever is more dilutive is included into the calculation of diluted earnings per share.

 

The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2009:

 

 

The following table sets forth the computation of basic and diluted earnings per share for the year ended December 31, 2008:

 

 

Validus Holdings, Ltd.

 

Notes To Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) — (Continued)

(Expressed in thousands of U.S. dollars, except share and per share data)

 

 

Validus calculates diluted book value per share using the “as-if-converted” method, where all proceeds received upon exercise of warrants and stock options would be retained by Validus and the resulting common shares from exercise remain outstanding. In its public records, IPC calculates diluted book value per share using the “treasury stock” method, where proceeds received upon exercise of warrants and stock options would be used by IPC to repurchase shares from the market, with the net common shares from exercise remaining outstanding. Accordingly, for the purposes of the Pro Forma Condensed Consolidated Financial Statements and notes thereto, IPC’s diluted book value per share has been recalculated based on the “as-if-converted” method to be consistent with Validus’ calculation.

 

The following table sets forth the computation of book value and diluted book value per share adjusted for the Acquisition as of March 31, 2009:

 

 

 

The following table sets forth the computation of debt to total capitalization and debt (excluding debentures payable) to total capitalization at March 31, 2009, adjusted for the Acquisition: