Assurant, Inc. (NYSE: AIZ), a global provider of risk management solutions, and The Warranty Group, a provider of protection plans and related programs, and a portfolio company of TPG Capital, have entered into a definitive agreement to combine operations, with Assurant shareholders retaining majority ownership of the combined company.
The transaction is valued at approximately $2.5 billion and is expected to close in the first half of 2018, subject to shareholder and regulatory approvals, and other customary closing conditions.
For the custom electronics industry, the merger is of interest to any integrators who sell extended warranty plans to their clients for TVs and other large electronics. Primarily, retailers have pushed these extended coverage plans, but in recent years some integrators have opted to offer extended warranties that cover full “systems” and not just individual products. Indeed, earlier this year warranty admin company AmTrust backed TechSafe with a plan aimed at CE pros.
With annualized revenue greater than $1 billion, The Warranty Group will enhance Assurant’s scale and market presence in its vehicle protection, extended service contracts and financial services businesses across 35 countries. The resulting geographic footprint also will provide resources to accelerate Assurant’s mobile strategy in key markets such as Asia-Pacific.
The Warranty Group’s U.S. vehicle protection business also brings new client partnerships and distribution channels including dealer networks and national accounts, and positions Assurant to capitalize on emerging trends in the auto market such as digital auto retailers.
“Assurant’s acquisition of The Warranty Group advances our position as a leading global provider in the vehicle protection business and aligns well with our lifestyle market growth strategy helping consumers protect their appliances, autos, mobile devices, and electronics,” said Assurant president and Chief Executive Officer Alan Colberg.
Nelson Chai, The Warranty Group’s president and CEO, said, “This transaction brings together two businesses with highly aligned expertise in markets across the world. We believe this combination enhances our ability to offer best-in-class products and services in addition to providing new opportunities to our clients, partners, employees and other key stakeholders.”
Eric Leathers, Partner at TPG Capital, said, “Since acquiring The Warranty Group, we have supported the company’s management team as they have expanded their global service contract business by pursuing attractive pathways for growth. This combination builds on these initiatives, and we at TPG are excited by the future value creation that will stem from this.”
Financial Structure
The transaction values The Warranty Group at $1.9 billion in equity value, or $2.5 billion of enterprise value, including its existing debt. Under the transaction agreement, Assurant, Inc. will become a wholly owned subsidiary of TWG Holdings Limited, whose name will be changed to Assurant Ltd.
Assurant shareholders will own approximately 77 percent of the combined entity as existing Assurant, Inc. shares are converted into shares of Assurant Ltd. on a one-for-one basis. TPG and its affiliates will own the remaining 23 percent, equal in value to 16 million Assurant shares, or approximately $1.5 billion at yesterday’s closing price. Assurant will also pay approximately $372 million in cash to TPG.
Upon closing, Assurant Ltd. shares will trade on the New York Stock Exchange under the ticker symbol AIZ. The senior management team of Assurant will lead the combined organization.
Assurant intends to finance the cash consideration and repayment of approximately $591 million of The Warranty Group’s existing debt through new debt, and preferred securities expected to be issued after closing. Assurant has entered into a commitment letter for a $1.0 billion bridge facility.
Assurant is a member of the Fortune 500. As of June 30, 2017, the company had $30 billion in assets and $6 billion in annualized revenue.
