Regulatory approval given for 50% debt and cash, 50% equity deal
Tawa plc ("Tawa" or "the Company") the UK-listed non life run-off consolidator, announces that it has received regulatory approval to acquire PXRE Reinsurance Company ("PXRE") a subsidiary of Argo Group International Holdings, Ltd ("Argo Group") (Nasdaq GS: AGII) from the Connecticut Department of Insurance. The acquisition is expected to complete later today.
In order to finance the acquisition in the ratio of approximately 50% debt and existing cash resources and 50% equity, 11,096,147 new ordinary shares of 10 pence each (the "New Shares") have been placed with Karrick Limited at a price of 130 pence each raising approximately £14.4m. Following the placing Financiere Pinault SCA will be diluted to 71.2% of Tawa, which is in accordance with the stated strategy of Financiere Pinault at the time of the IPO.
Karrick is a Guernsey-registered company and is wholly-owned by Karrick Trust established for various members of the Lakshmi Mittal family. Karrick, an investment company, is a long-term value and growth investor.
Natixis have provided a $30 million debt facility to a subsidiary of Tawa to finance the acquisition.
On a pro-forma basis Tawa group net assets, taking into account the PXRE Re acquisition, new debt taken on and the share placing will rise from 116 pence to 121 pence per share.
The acquisition will give Tawa its first operation in the US, the largest run-off market in the world and is in accordance with Tawa's stated consolidation strategy set out at the time of its admission to AIM in July 2007.
PXRE primarily wrote reinsurance of property, marine and aerospace risks with a focus on catastrophe related coverage. Its operations were put into run-off in February 2006 following the downgrading by analysts of the then parent of PXRE in 2005 as a result of the 2005 hurricanes in the Gulf.
Application will be made today for admission of the New Shares to AIM. Admission is expected to become effective on 04 April 2008.
