Risk arbitrage: June 8, 2009

IPC Holdings Ltd. |IPCR
Max Capital Group Ltd. |MXGL

Deal value $1.45 billion

Spread 06/01/09 -$0.17, or -0.68%

Shareholders of IPC Holdings Ltd. and Max Capital Group Ltd. are set to meet June 12 to vote on their contested $1.4 billion insurance merger. The stock swap exchanges 1.5555 of a Max Capital share for each share of IPC. Subsequent to the March announcement, Validus Holdings Ltd. raised an offer to IPC shareholders to $3 in cash and 1.1234 of a Validus share. On June 1, IPC shares traded at a spread of $3.70 to their value in the Validus offer.

Max Capital and IPC argue that their merger is superior because it provides diversification of IPC's property-casualty line from the catastrophe and short-tail business. Validus says its short-tail catastrophe business has yielded higher margins and its bid offers a premium and some cash. IPC has said it would reject Validus even if the Max deal is rejected. Validus filed in Bermuda court to establish a special meeting of IPC shareholders to consider its offer if the IPC board still rejects it. The Bermuda court, Validus says, found that a deal could be put to IPC shareholders but determined not to order a meeting in advance of the June 12 vote on the Max merger.

Verenex Energy Inc. |VNX.T
CNPC International Ltd.

Deal value C$400 million

Spread 06/01/09 C$0.98, or 10.9%

The acquisition of Verenex Energy Inc. by CNPC International Ltd. hits a termination date on June 24 and, despite Libya's National Oil Corp. apparent intent to bid for Verenex, there are no signs of when it intends to act.

The Verenex purchase agreement with China National Petroleum Corp., or CNPCI, is priced at C$10 per share and preconditioned on an approval of the Libyan national oil company, or NOC. The termination date can be extended by two months if the deal is not approved and Verenex and CNPCI do not decide to mutually end the agreement.

The required, and so far withheld, NOC approval relates to Calgary, Alberta-based Verenex's primary oil exploration asset, Area 47 in Libya. Under certain circumstances, NOC has a right of first refusal if Verenex undergoes a change of control. Verenex has said the right of first refusal applies only to an asset sale related to Area 47 and not a holding company-level deal. The issue could go to arbitration under the terms of the profit-sharing agreement.

Verenex has tried, and failed, to negotiate with NOC. As recently as May, NOC chairman and CEO Shokri Ghanem said Libya will complete an acquisition of Verenex within weeks by trumping the CNPCI offer and that a deal is a matter of procedure. But NOC has not put forward an offer, and both Verenex and CNPCI have obeyed every letter of their agreement thus far, sources say.

The CNPCI agreement provides for C$46.69 million ($42.97 million) to NOC for its approval. The buyer is not obligated to increase that payment, which amounts to about C$1.05 per share for Verenex, so CNPCI under its current agreement is paying about C$11 per share for Verenex.