QBE Insurance and Lloyd's underwriter Limit have outlined the terms of a recommended takeover following Limit's surprise defection from Wellington Underwriting.

QBE upped its offer to 140p per Limit share, valuing the company at around £375m.

The two groups said the acquisition of Limit by QBE would give the merged group a strengthened position in the Lloyd's market and provide a table platform for Limit's executive team to develop the business, as well as increase scale, capital strength and efficiency.

Until last week, Limit had given its backing to a takeover by Wellington, but QBE's offer – up from 135p – tipped the scales.

QBE chief executive Frank O'Halloran said the deal would improve the company's overall spread of business and earnings diversification.

“The transaction marks another important step in fulfilling our vision of being a highly successful general insurer and reinsurer,” he said.

Limit chairman Jonathan Agnew said the offer – which represents a 73% premium over the company's share price before the QBE approach – “gives Limit shareholders the benefit of the auction process we have conducted”.

QBE UK has been active in Lloyd's since 1996 and has four syndicates, providing £110m worth of capacity.

Its Australian parent company is a general insurance and reinsurance group.

QBE said Limit would form the cornerstone of a new fifth operating division that will comprise the existing Lloyd's operations of both Limit and QBE. It will manage around 9% of the total capacity of the market. In the year to June, QBE earned gross premiums of around £407m.

Limit manages eight Lloyd's syndicates, with a total capacity of £812m.

Standard & Poor's has affirmed its “A+” insurer financial strength and counter-party credit ratings on the various underwriting entities of QBE. It has also removed them from CreditWatch, where they were placed in May with negative implications.

The affirmation is based on the assessment that the company has an achievable funding strategy for the acquisition of Limit, and that it will be a cohesive fit for QBE's strategic direction in Europe.