Canadian Underwriter

Intact’s acquisition of OneBeacon Insurance Group expected to close this week

September 25, 2017   by Canadian Underwriter

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Intact Financial Corporation (IFC) announced on Monday that it has obtained all regulatory approvals required to complete the previously announced proposed acquisition of OneBeacon Insurance Group, Ltd.

The acquisition is expected to close on or about Sept. 28, IFC said in a press release. IFC will acquire for OneBeacon for US$18.10 per OneBeacon common share in cash, resulting in an aggregate purchase price of approximately US$1.7 billion. Upon completion of the acquisition, OneBeacon will be an indirect wholly-owned subsidiary of IFC and will continue to operate as OneBeacon Insurance Group, Ltd. in the United States.

The release added that IFC expects that, effective the acquisition closing date, the subscription receipts issued by IFC on May 11, 2017 to fund a portion of the purchase price for OneBeacon will automatically be exchanged for IFC common shares in accordance with the terms of the subscription receipt agreement. IFC also expects that trading in the subscription receipts will be halted on the Toronto Stock Exchange (TSX) prior to market opening on the acquisition closing date, that the transfer register maintained by the subscription receipt agent will be closed and that the subscription receipts will be delisted by the TSX after close of trading on the acquisition closing date. The common shares to be issued on the exchange of the subscription receipts are expected to begin trading on the TSX on the acquisition closing date, the release added.

Holders of subscription receipts as of Sept. 15 will be entitled to receive a dividend equivalent payment on Sept. 29 of $0.64 per subscription receipt that they held on Sept. 15.

IFC initially announced on May 2 that it intended to acquire the U.S. speciality insurer for US$1.7 billion. At the time, Intact said that it had entered into a “definitive agreement and plan of merger” to acquire OneBeacon, “creating a leading North American specialty lines insurer with over $2 billion in specialty lines premiums.”

The acquisition “combines Intact’s leading commercial lines track record and deep data, claims and digital expertise with OneBeacon’s high caliber team and specialty lines capabilities,” Intact said in a statement in May. “The acquisition bolsters Intact’s Canadian business with new products and cross-border capabilities, and better positions Intact to compete with international insurers. Furthermore, this provides an additional growth pipeline to leverage Intact’s consolidation expertise in a fragmented specialty lines market.”

The transaction was unanimously approved by the boards of directors of both companies and was subject to approval by OneBeacon’s shareholders.

In May, Intact said that OneBeacon’s debt of approximately US$275 million will remain outstanding. However, Intact has secured the conditional purchase of a reinsurance agreement pursuant to which a “major reinsurer” will assume 80% of any negative development in excess of US$74 million with respect to OneBeacon’s claims liabilities as at Dec. 31, 2016, the Canadian insurer said in the statement. The maximum amount payable by the reinsurer is US$200 million, subject to some exclusions and limitations.

Intact is the largest provider of property and casualty insurance in Canada with over $8 billion in annual premiums. Supported by over 12,000 employees, the company insures more than five million individuals and businesses through its insurance subsidiaries and is the largest private sector provider of P&C insurance in British Columbia, Alberta, Ontario, Quebec, Nova Scotia and Newfoundland & Labrador. The company distributes insurance under the Intact Insurance brand through a network of brokers, including its wholly owned subsidiary, BrokerLink, and directly to consumers through belairdirect.

OneBeacon Insurance Group is a Bermuda-domiciled holding company that is currently publicly traded on the New York Stock Exchange. Its underwriting companies offer a range of specialty insurance products sold through independent agencies, regional and national brokers, wholesalers and managing general agencies. OneBeacon’s solutions target group accident and health; architects and engineers; commercial surety; entertainment; environmental; excess property; financial institutions; financial services; healthcare; management liability; ocean and inland marine; public entities; technology; and tuition refund.