A consortium led by financial services company Sixth Street has formalised a definitive merger agreement to acquire Bermuda-based insurer Enstar Group.

The transaction values the business at $5.1bn, with Enstar shareholders set to receive $338 in cash per ordinary share upon closing.

This reflects an 8.5% premium to Enstar's 90-day volume-weighted average price and a 6.9% premium to the 60-day average, as of 26 July 2024.

Sixth Street is fully financing the deal in collaboration with its co-investors.

Liberty Strategic Capital and J.C. Flowers & Co, and some other institutional investors are also participating in the transaction.

Enstar's board has unanimously approved the deal, which is expected to close in mid-2025.

The deal now awaits regulatory and shareholders’ clearances.

As part of the agreement, Enstar has initiated a 35-day “go-shop” period, until 2 September 2024, allowing for the solicitation of alternative proposals from other third parties.

However, there is no guarantee that this will result in a superior offer, the companies noted.

The insurance company will not disclose developments regarding this process unless deemed appropriate or required.

Meanwhile, Enstar can terminate the merger agreement to pursue a better proposal both during and after the “go-shop” period, as outlined in the agreement's terms and conditions.

Upon completion, Enstar will become a privately held company, maintaining its current operations and business strategy.

The insurer’s common stock will be delisted from public trading.

Enstar CEO Dominic Silvester said: “This transaction provides a full liquidity event for shareholders and is a testament to the strength of our team. We believe this is the best next step for our shareholders and we look forward to this exciting new chapter.”

Goldman Sachs & Co, Paul, Weiss, Rifkind, Wharton & Garrison, and Hogan Lovells are advising Enstar on the transaction.

Sixth Street's advisors include Ardea Partners, Barclays, Cleary Gottlieb Steen & Hamilton, Debevoise & Plimpton, J.P. Morgan Securities and Simpson Thacher & Bartlett.

Sixth Street co-founder and partner Michael Muscolino said: “Enstar has a proven track record of delivering innovative legacy P&C [property and casualty] solutions and capitalising on attractive opportunities in the reinsurance market, while maintaining a conservative balance sheet and strong risk management culture.

“As an existing investor in Enstar, we have a deep respect for the business Enstar’s management team has built and look forward to continue supporting the company’s current strategy.”