Assured Guaranty to acquire Financial Security Assurance

By Sheri Kasprzak

New York, Nov. 14 - Assured Guaranty Ltd. will buy Financial Security Assurance Holdings Ltd. from Dexia SA, the companies said in statements released Friday.

In the agreement Assured plans to purchase the bond insurer in a $722 million deal. Of the purchase price, $361 million will be in cash and the remainder will be in the form of 44.567 million shares. Also as part of the deal, Assured will assume $730 million of FSA's outstanding debt.

Assured, according to a statement, will finance the cash portion of the acquisition with proceeds from a public equity offering.

"We are delighted with this fantastic opportunity," said Assured chief executive officer Dominic Frederico in a statement.

"Not only do we create significant value for our shareholders, the combination of the two organizations will create the premier financial guaranty company with the talent, capacity, financial resources and relationships to serve the demands of our customers."

The transaction is expected to close in the first quarter of 2009.

"We believe that this combination is a win-win for issuers and investors, as well as for the two companies," said Robert Cochran, CEO of FSA, in a statement.

"The whole will be greater than the sum of its parts based on the exceptional talents of our people, the larger scale of operation and greater capital strength achieved. While Dexia has been a highly supportive parent over the past eight years, we look forward to working with our new partners at Assured Guaranty to build a bigger and better franchise."

Fitch Ratings released a statement on the proposed transaction on Friday as well, stating that it does not feel the acquisition will have a negative impact on the ratings of either of the companies.

"Concerning the existing financial services business of FSA, which has been a particular area of concern with respect to FSA's ratings, an initial agreement has been reached to isolate and remove the credit and liquidity risks of that business for AGL/FSA," said the Fitch statement.

"As presented, the risks of the financial services business will be fully immunized by Dexia and sovereign support. Fitch understands effective isolation for any risks of the financial services business is a condition to the transaction's close."

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