Randall & Quilter Investment Holdings Ltd (R&Q) has said this morning that Brickell PC Insurance Holdings LLC, which is backed by 777 Partners, has said it aims to terminate the acquisition agreement the pair were trying to implement.
The deal, which was announced at the start of April, valued Randall & Quilter’s (R&Q’s) existing issued share capital at approximately £482 million, while Brickell PC Insurance Holdings LLC, a vehicle backed by 777 Partners, was also proposing to invest $100 million of new equity funding into R&Q as part of the arrangement.
As we explained the other day, initial shareholder voting on the proposed takeover of R&Q was adjourned as the company failed to to gain sufficient support for the deal at the first attempt.
A second shareholder meeting and vote was due to take place today.
Now R&Q has said that it has received a letter from Brickell alleging that R&Q is in breach of certain obligations under the implementation agreement related to the proposed transaction.
777 Partners backed Brickell has claimed that this is a material breach by R&Q of the terms of the Implementation Agreement and that it wants to exercise its right to terminate the deal with immediate effect.
R&Q said it does not agree and has written back to Brickell in such terms, adding that in its view the deal agreement remains in effect.
On today’s meeting, R&Q said it believes a further adjournment will garner it the necessary support to gain shareholder agreement on the deal, so it is proposing to adjourn the meeting again.
But, R&Q also pointed out that even if resolutions were approved, “Given Brickell’s purported termination of the Implementation Agreement, there can be no certainty that Brickell will provide the US$100m New Equity Funding or in relation to the Acquisition generally.”
“Whilst R&Q may be able to seek to enforce the terms of the Implementation Agreement through the appropriate courts, there can be no certainty that such a claim would succeed or of the timescales for such a claim. In addition, Shareholders should note that, in the absence of an order for specific performance, Brickell’s maximum liability to R&Q under the Implementation Agreement in terms of damages may be US$12.5 million,” the company further explained this morning.
Additionally, R&Q wants to start an equity raise to shore up its finances.
However, the company noted that, “Under the terms of the Implementation Agreement, R&Q is not entitled to conduct an equity fundraising without Brickell’s consent.”
R&Q said it will today seek Brickell’s consent to progress a US $100 million equity fundraising.
This would be expected to cater for R&Q’s funding needs, given the potential failure of the acquisition and funding that was supposed to have gone alongside it.
“R&Q is of the view that it would be unreasonable for Brickell to withhold such consent,” the company said.
It seems there is no certainty R&Q will get a deal of any sorts with the 777 Partners backed vehicle now, leaving the company needing a relatively urgent capital infusion.
It will be interesting to see how easy that is to secure after the way this proposed transaction has played out.
R&Q’s share price plummeted by just over 26% this morning (by 08:30 UK), indicating the level of market sentiment in the company after this announcement of the deal likely having fallen apart.