Intact Financial Corporation has announced that it has entered into an agreement with a group of underwriters, led by CIBC Capital Markets and Barclays Capital Canada, Inc., designed to finance a slice of its proposed acquisition of UK insurer RSA.
Under this arrangement, the underwriters have agreed to purchase, on a bought deal basis, 9,272,000 subscription receipts of Intact at a price of $134.50 each, for gross proceeds of $1.25 billion.
The underwriters intend to arrange for substituted purchasers for the Subscription Receipts, which will be offered by way of private placement to accredited investors and other exempt purchasers in all provinces and territories of Canada.
Additionally, it’s been reported that the Subscription Receipts will be subject to a four month hold period under applicable Canadian security laws.
Intact also announced recently that it had entered into subscription agreements with institutional investors for the aggregate issuance of 23.8 million subscription receipts at a price of $134.50 per subscription receipt, for gross proceeds of $3.2 billion – known as the Cornerstone Equity Financing.
This latest Offering, coupled with the Cornerstone Equity Financing, provide Intact with all of the equity financing it would require to fund its share of the purchase price for RSA.
Each subscription receipt will entitle the holder to receive one common share of Intact upon closing of the transaction. Completion of the Offering is conditional upon the Consortium, which consists of Intact and Tryg, announcing a firm offer for RSA on or prior to closing. The offering is expected to close on December 3rd, 2020.
As we wrote previously, the transaction would generate significant value through loss ratio and expense ratio improvements across the operations of Intact. Furthermore, the acquisition of RSA’s Canadian operations is expected to drive approximately 75% of the value creation, with UK & International operations accounting for approximately 20% and specialty lines accounting for approximately 5%.
