Intact Financial Corporation (TSX: IFC) has entered into a definitive agreement to acquire OneBeacon Insurance Group, Ltd. (NYSE: OB), a leading US specialty insurer, for US $18.10 cash per common share, for aggregate cash consideration of approximately US$1.7 billion or CDN $2.3 billion. OneBeacon debt of approximately US $275 million will remain outstanding.
OneBeacon was formed in 2001 when White Mountains Insurance Group, Ltd. acquired the former CGU’s U.S. property-casualty business from Aviva plc. In 2006, White Mountains sold 27.6 million of OneBeacon’s common shares in an initial public offering, or 27.6% of OneBeacon’s common shares at the time of the initial public offering. As of May 2, 2017, White Mountains owned 75.7% of OneBeacon’s common shares, representing 96.9% of the voting power. White Mountains has agreed to vote in favor of the transaction.
Intact intends to finance the acquisition and related transaction expenses using a combination of $700 million of equity financing, approximately $700 million of excess capital and approximately $1.0 billion of financing comprised of bank term loans, medium term notes and preferred shares.
The $700 million of equity financing is being completed through a combination of a $360 million bought deal subscription receipt offering led by CIBC Capital Markets and TD Securities Inc. and $340 million of subscription receipts issued on a private placement basis to three Canadian institutional investors, Caisse de dépôt et placement du Québec (CDPQ), Canada Pension Plan Investment Board (CPPIB) and Ontario Teachers’ Pension Plan.
Goldman, Sachs & Co. LLC is acting as financial advisor to Intact Financial Corporation. Skadden, Arps, Slate, Meagher & Flom LLP and Blake, Cassels & Graydon LLP are acting as legal advisors to Intact Financial Corporation in this transaction. Davies Ward Phillips & Vineberg LLP is acting as legal advisor to CDPQ, CPPIB and Ontario Teachers. McCarthy Tétrault LLP is acting as counsel to the underwriters in the bought deal subscription receipt offering.
Credit Suisse Securities (USA) LLC acted as exclusive financial advisor and Cravath, Swaine & Moore LLP, Conyers Dill & Pearman Limited and Kramer Levin Naftalis & Frankel LLP acted as legal advisors to OneBeacon in the transaction.
photo credit: OneBeacon