Merging company

R&Q will be acquired by 777 Partners backed by Brickell PC Insurance

Randall & Quilter Investment Holdings Ltd (R&Q), the global non-life specialty insurance company focused on program management and legacy transactions, is set to be acquired by one of its major shareholders, in an acquisition backed by the investment group 777 Partners.

The acquisition will value the existing issued share capital of Randall & Quilter (R&Q) at approximately £482m, while Brickell PC Insurance Holdings LLC, which is backed by 777 Partners, will also invest $100m of new equity in R&Q.

The $100 million equity financing is being used to deleverage R&Q’s balance sheet, as well as improve the company’s financial profile after a thorough review of the legacy insurance portfolio.

The acquisition requires R&Q shareholder approval, as well as regulatory approvals to be consummated.

The directors of R&Q support the proposed acquisition and urge shareholders to support it.

K2 international

The acquirer, Brickell, is controlled by 777 Partners Steve Pasko and its lead economic investor is Miami-based investment firm 777 Partners LLC.

Brickell and its subsidiaries currently hold a 23.2% stake in R&Q, but own 9.9% of the voting rights in the company.

The merger process will see the formation of Brickell PC2 Insurance Holdings Limited in Bermuda in 2022 with the aim of merging with R&Q.

Brickell PC2 Insurance Holdings Limited will merge with and into R&Q, with R&Q remaining the surviving company and R&Q becoming an indirect wholly-owned subsidiary of Brickell.

As a result, R&Q will be owned by Brickell, which will become the holding company for R&Q and Brickell’s other existing insurance operations.

R&Q is transitioning its business to a more capital-light model, part of which has moved its legacy portfolio to take advantage of third-party capital appetite, while expanding its program-managed fee income business.

The company expects to reach approximately $90 million in pretax operating income by the end of fiscal 2023.

This is due to the belief that it can generate significant operating leverage as its business grows, supported by the continued growth of its program management business and the ability to deploy third-party capital raised through of his Gibson Re sidecar.

It should also be noted that a review of legacy reserves revealed “potential of approximately $90 million2 a pre-tax non-cash charge associated with the impairment of a structured reinsurance contract that was previously capitalized as an asset on the Group’s balance sheet,” according to the company.

Additionally, R&Q said it used “significant cash capacity to fund collateral requirements during certain reserve builds” in the fourth quarter of 2021.

These are the two drivers of the need for an additional $100 million of equity, to deleverage the balance sheet, to counter an IFRS-based post-tax loss of approximately $135 million to $145 million created by these reserve issuances. .

Steven Pasko, Chairman of Brickell, said, “We have had a strong relationship with R&Q as a shareholder since 2019 and have continued to support the business with an injection of capital in 2020. We are excited about the prospect of integrating R&Q in our strong insurance ecosystem. and expanding our business into the legacy space, combining R&Q’s deep experience in managing complex claims with 777’s unique asset management capabilities.”

Commenting on the acquisition, William Spiegel, Executive Chairman of R&Q, added: “Having agreed with Brickell to the terms of a recommended cash acquisition of R&Q and a new $100 million equity financing, the Board of he administration of R&Q is unanimous in believing that this represents the best outcome for our shareholders. The acquisition offers shareholders the opportunity to crystallize the value of their holdings, in cash, and at a material premium of 20% to the undisturbed share price, and a substantial 1.82x multiple of net worth of inventory per share expected in fiscal 2021, while providing $100 million of new equity to deleverage our balance sheet and improve our financial profile.

“Furthermore, the offer demonstrates both the strength of our business today and the opportunities available to us. The value Brickell sees in R&Q is a testament to the clear strategic vision we have set, the quality of our legacy assurance and program management businesses, and the skills and expertise of our people. Brickell is a long-term strategic partner who has a deep understanding of our business and our markets, and has embraced our five-year plan to transform R&Q into a profitable, capital-light enterprise. In addition to enabling our shareholders to realize attractive value, we also believe that an acquisition by Brickell would be a great outcome for our business partners and employees, Brickell’s existing presence and significant ambitions in the facade and of inheritance being very complementary to our activity. I would like to thank our employees for their continued commitment as we continue to focus on business as usual and execute on our strategy.

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