Reinsurance News

R&Q shareholders reject acquisition, capital raise to proceed

26th May 2022 - Author: Steve Evans

Shareholders of Randall & Quilter Investment Holdings Ltd (R&Q) have again rejected an acquisition of the company by Brickell PC Insurance Holdings LLC, which is backed by 777 Partners, but have instead approved plans to focus on a $100m+ capital raise.

randall-quilter-rq-logoR&Q failed to gain shareholder approval for the acquisition at a first special general meeting (SGM) last week, but had hoped to pass the necessary resolutions at a reconvened meeting yesterday after drumming up further investor support.

However, its plans were scuppered when Brickell delivered a letter declaring a termination of the deal just one day prior to the vote, alleging that R&Q was in breach of certain obligations under the implementation agreement related to the proposed transaction.

The deal, which was announced at the start of April, had valued R&Q’s existing issued share capital at approximately £482 million, and Brickell was also proposing to invest $100 million of new equity funding into R&Q as part of the arrangement.

As the transaction will now not proceed, R&Q says it is instead focussed on plans to raise approximately $100 million via a placing and up to $8 million via an open offer fundraise, which gained “strong interest” from shareholders after a short market sounding process.

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The capital raise will comprise a placing of shares to institutional shareholders and an open offer to existing qualifying shareholders, with $60 million of the proceeds to be used to fund collateral requirements and the balance to pay down debt.

For its part, R&Q argues that the the vote against the resolutions required for its acquisition by Brickell “demonstrates the confidence of certain of the Company’s shareholders in the future value and prospects of the business and support for an equity raise.”

But market prices suggest that confidence in R&Q has been shaken, as its share price plummeted by 42% yesterday after Brickell’s intention to terminate the deal was announced publicly, and has only recovered by 6% at time of writing, following news of the reversal of strategy towards a capital raise.

Commenting on the latest shareholder meeting, William Spiegel, Executive Chairman of R&Q, said: “Following the outcome of today’s vote, we will turn our focus to the fundraise. Having prepared for this as an option when we originally engaged with shareholders, we are well placed to launch this shortly.”

“Throughout this process our priority has always been delivering the best outcome for shareholders and the outcome of the vote has demonstrated the longterm value that investors see in the business. We continue to have great confidence in the future prospects for R&Q, and expect in excess of $90 million in pre-tax operating profit in 2024. We look forward to engaging with our shareholders on the fundraise.”

Alastair Campbell, Non-Executive Director and Senior Independent Director of R&Q, commenting on behalf of the Board, added:
“Following further engagement with our shareholders our priority now is to secure the funding needed to de-lever our balance sheet and improve our financial profile. Since becoming Executive Chairman just over twelve months ago, William, alongside his new management team, have outlined a compelling new strategy and driven significant positive change at R&Q, enhancing its culture, risk management and governance. We look forward to engaging with our shareholders as we proceed with the fundraise.”

The placing is expected to be launched on 13 June 2022 following the release of R&Q’s full-year results for 2021, and company is expecting to offer a maximum of 10% of its issued share capital on a firm basis with additional ordinary shares being offered conditional upon shareholder approval at a special general meeting on 11 July 2022.

Qualifying shareholders will then have the opportunity to subscribe for ordinary shares in the open offer at the same offer price as the placing for up to an aggregate value of $8 million, with the open offer expected to be launched on 15 June.

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