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Randall & Quilter Investment Holdings Ltd on Friday said it has accepted a £482 million takeover offer from 23% shareholder Brickell PC Insurance Holdings LLC.
Brickell will pay 175 pence in cash per R&Q share, a 20% premium to its closing price of 146p on Thursday. The stock was up 9.9% early Friday in London at 159.84p, though still is down 7.3% over the past 12 months.
Despite holding 23.2% of R&Q shares, Brickell has only 9.9% of the voting rights under an agreement related to its exchange of preferred stock last year. The offer also has support from R&Q directors for their 3.3% holding.
R&Q is a Bermuda-based specialty non-life insurance company with Program Management and Legacy Insurance businesses. Brickell is controlled by Steven Pasko whose investment firm 777 Partners LLC is based in Miami. Brickell PC2 Insurance Holdings Ltd will be incorporated in Bermuda in 2022 for the purpose of merging with R&Q.
In explaining its decision to accept the offer from Pasko, R&Q said 2021 was a ‘pivotal year’ for the company as it moved its Legacy Insurance business toward a capital light, recurring fee-based business model. This was done by forming Gibson Re, a Bermuda-domiciled collateralised reinsurer with about $300 million in third-party capital. The use of Gibson Re as a legacy sidecar reinsurer for 80% of R&Q's Legacy Insurance business simplifies the Legacy Insurance revenue model, R&Q said.
However, the repositioning has resulted in a temporary reduction in R&Q earnings. The new management of R&Q, which took over in April last year, also have identified a potential $90 million non-cash pretax charge associated with impairing a structured reinsurance contract that was previously capitalised as an asset on R&Q's balance sheet.
Brickell has committed to provide $100 million in new equity funding to R&Q to de-leverage its balance sheet.
‘We have enjoyed a strong relationship with R&Q as a shareholder since 2019 and further supported the business with an infusion of capital in 2020,’ Pasko said. ‘We are excited about the prospect of integrating R&Q into our robust insurance ecosystem and expanding our business into the legacy space, by combining R&Q's deep experience in managing complex run-off claims with 777's unique asset management capabilities.’
Added R&Q Executive Chair William Spiegel: ‘Brickell is a long-term strategic partner that has a deep understanding of our business and our markets, and has bought into our five-year plan to transform R&Q into a fee-based, capital lighter business.’
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