Brookfield Reinsurance, the operator of a financial services business providing capital-based solutions to the insurance industry, has announced the acquisition of Argo Group International Holdings, Ltd. in an all-cash transaction valued at roughly $1.1 billion.
The Boards of Directors of both Brookfield Reinsurance and Argo have unanimously approved the definitive merger agreement, which is expected to close in the second half of 2023, subject to approval by Argo shareholders and other customary closing conditions.
Under the agreement, each issued and outstanding Argo common share will be converted into the right to receive $30 in cash at closing of the merger, funded by existing cash on hand and liquidity available to Brookfield Reinsurance.
The merger consideration per Argo common share represents a 6.7% premium to the firm’s closing share price on February 7th, 2023, and a 48.7% premium over its closing share price on September 7th, 2022, which is the last full trading day prior to Argo announcing the sale of Argo Underwriting Agency Limited and its Lloyd’s Syndicate 1200 and the continuation of its strategic alternatives review process.
In connection with the merger agreement, Voce Capital Management LLC entered into a voting and support agreement whereby it agreed to vote all of the common shares held by it in favour of the merger and take certain other actions, subject to the terms and conditions of the voting and support agreement.
Additionally, Argo has agreed to suspend the payment of dividends on its common shares through the closing of the transaction.
After a challenging period for the specialty insurer and reinsurer, Argo announced in April of last year that its board had begun to explore ‘strategic alternatives’ including a potential sale, merger, or other strategic transaction.
Later in the year, the firm defended its strategic review process amid mounting pressure from activist investor Capital Returns and its allies, who were seeking to replace two directors on Argo’s Board at the annual general meeting (AGM).
In the end, Argo’s nominations for members of its Board where “overwhelmingly” voted in favour of by shareholders, after the withdrawal of two board nominations by Capital Returns Master just days before.
As noted today by Thomas A. Bradley, Argo’s Executive Chairman and Chief Executive Officer (CEO), this agreement with Brookfield Reinsurance “brings a successful conclusion to Argo’s strategic alternatives review process and represents the best path forward for Argo, our employees and policyholders while also maximizing value for our shareholders.”
“By joining Brookfield Reinsurance, Argo will continue to serve our brokers with greater financial strength and opportunities to grow as a U.S.-focused specialty insurer,” he added.
For Brookfield Reinsurance, which launched in 2020, the agreement comes less than a year after it completed its acquisition of American National in an all-cash transaction, valued at approximately $5.1 billion.
Sachin Shah, CEO of Brookfield Reinsurance, commented: “The acquisition of Argo represents another milestone in the continued expansion of our insurance solutions business. Argo’s leading U.S. specialty platform adds a foundational piece to our expanding U.S. P&C operations. We look forward to partnering with the Argo team to support the growth of its core businesses, build on its strong franchise, and deliver value for policyholders.”