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Transaction/Case Details

Intact Financial Corporation completes C$754M Subscription Receipt Offering comprised of C$414M Bought Deal and C$340M Private Placement

DATE CLOSED

May 11, 2017

BUSINESS SECTOR

Financial Services

LEAD OFFICE

Montreal

VALUE

414 Million CAD


OVERVIEW

On May 2, 2017, Intact Financial Corporation  announced a definitive agreement and plan of merger pursuant to which it agreed to acquire OneBeacon Insurance Group, Ltd., a leading US specialty insurer. Under the terms of the all-cash deal, OneBeacon shareholders will receive US$18.10 cash per common share, a 14% premium based on OneBeacon's closing stock price on the NYSE of US$15.89 as of May 1, 2017 and a 15% premium to the volume weighted average price over the last 30 days. This represents an aggregate cash consideration of approximately US$1.7 billion (C$2.3 billion). The transaction has been unanimously approved by the Boards of Directors of both companies and is subject to approval by OneBeacon's shareholders. 

Intact intends to finance the acquisition and related transaction expenses using a combination of C$700 million of equity financing, approximately C$700 million of excess capital and approximately C$1.0 billion of financing comprised of bank term loans, medium term notes and preferred shares.  The C$700 million of equity financing is being completed through a combination of a C$360 million bought deal subscription receipt offering and C$340 million of subscription receipts issued on a private placement basis to three Canadian institutional investors, namely Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board and Ontario Teachers' Pension Plan (collectively, the "Private Placement Subscribers").

In connection with the bought deal subscription receipt offering, Intact  entered into an agreement with a group of underwriters, led by CIBC Capital Markets and TD Securities Inc. for the issue of 3.9 million subscription receipts at a price of C$91.85 per subscription receipt (less an underwriting fee) pursuant to a bought deal public offering in Canada and to qualified institutional buyers in accordance with Rule 144A of the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"). Each subscription receipt will entitle the holder to receive one common share of Intact upon closing of the acquisition. Intact  also granted the underwriters the option to purchase an additional 0.6 million subscription receipts exercisable at the offering price for a period of 30 days after the closing of the offering for additional gross proceeds of up to C$54 million. The gross proceeds (net of the initial underwriters' fee) from the sale of the subscription receipts will be held in escrow until the acquisition close date.

On May 11, 2017 Intact closed its bought deal offering of 4.5 million Subscription Receipts resulting in gross proceeds (including the over-allotment option proceeds) to IFC of approximately C$414 million.  Additionally, IFC has completed the private placement (the "Private Placement") to Caisse de dépôt et placement du Québec, Canada Pension Plan Investment Board and Ontario Teachers' Pension Plan, of an aggregate of 3.7 million Subscription Receipts for aggregate gross proceeds of approximately C$340 million.

McCarthy Tétrault LLP advised CIBC World Markets Inc. and TD Securities Inc., the lead underwriter, with a team led by Andrew Parker and Patrick Boucher that included  Fraser Bourne, Isabelle Nazon, and Mason Gordon.

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