Intact Financial Corporation announced Nov. 18 that together with Tryg A/S, the company has reached an agreement with RSA Insurance Group plc to purchase, in an all-cash acquisition, the entire issued and to be issued share capital of RSA.
Under the terms of the agreement, Intact will pay $5.1-billion for RSA’s Canadian, United Kingdom and international businesses while Tryg retains RSA’s Swedish and Norwegian businesses. (Tryg will pay $7.2-billion for its share of the company.) Both Intact and Tryg will co-own RSA’s Danish business. As part of the acquisition, Intact also intends to assume the full amount of RSA’s outstanding issued debt and hybrid securities, totaling $1.3-billion and $700-million, respectively.
“This acquisition is highly strategic for Intact,” says Intact’s chief executive officer, Charles Brindamour in a statement announcing the deal. “It expands our leadership position in Canada, builds on our strong track record in specialty lines and puts us in a solid position to strengthen RSA’s UK and Ireland operations.” He adds that Intact plans to leverage its capabilities in data, risk selection and claims management across the company once the deal is complete.
Intact intends to finance the $5.1-billion acquisition and the additional related transaction costs of $700-million, through private placement subscription receipts – agreements with the Caisse de dépôt et placement du Québec (CDPQ), the Canada Pension Plan Investment Board (CPPIB) and the Ontario Teachers' Pension Plan Board – through a bank term loan facility and a bond bridge that Intact intends to refinance with $800-million of medium-term notes and preferred share issuances.
Intact says it will maintain a strong capital position on completion of the deal, with an estimated capital margin above $1.5-billion and a minimum capital test (MCT) ratio above 194 per cent. The company says it does not anticipate the transaction or its planned financing structure will lead to a change in its current credit ratings.
The acquisition is currently expected to be completed during the second quarter of 2021.