Validus Holdings Ltd. will acquire all of the issued and outstanding shares of Flagstone Reinsurance Holdings S.A. The combined company will maintain Validus’ name, headquarters and executive management.

Flagstone Re says completion of the transaction, which is expected to occur in Q4 2012, is subject to customary closing conditions, including obtaining regulatory approvals and the approval of Flagstone’s shareholders. Validus has obtained agreements from investment funds associated with Lightyear Capital and Trilantic Capital Partners, which, collectively, own about 22.5 percent of the outstanding Flagstone shares, to vote in favor of the transaction.

Flagstone shareholders will receive 0.1935 Validus voting common shares and $2 in cash for each Flagstone share. The transaction provides Flagstone shareholders with a 19.4 percent premium and $8.43 of value per share, based on the closing share price for each of Validus and Flagstone as of Aug. 29, 2012, and represents an aggregate equity value of $623.2 million. For U.S. tax purposes, the proposed transaction is intended to be tax-free to Flagstone shareholders, with respect to the Validus voting common shares they receive.

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