Assurant will pay $2.5 billion to acquire The Warranty Group, a rival that provides insurance protection plans in areas including consumer electronics and appliances.

Plans call for closing the deal in the first half of 2018, pending shareholder and regulatory approvals, plus other closing conditions. Assurant is buying The Warranty Group from TPG Capital, a global alternative asset firm with interests in private equity, growth ventures, real estate, credit and public equity. TPG will retain a stake in the combined operation.

Assurant said that the acquisition will help fuel its strategy to build a greater presence in the global lifestyle market. Assurant offers insurance and related services for homes, cars, appliances, mobile devices and funerals. The Warranty Group covers products such as consumer electronics, appliances and automobiles, and it also markets credit card and membership benefit-products.

“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,” Assurant President and CEO Alan Colberg said in prepared remarks.

Colberg added that the combined company will be able to grow globally and boost its profitable growth more quickly in important markets that Assurant has already targeted as part of its growth strategy. As well, he said, the post-merger option will have “substantial operating synergies, generating more diversified and predictable earnings and furthering product innovation on a global scale.”

Nelson Chai, The Warranty Group’s president and CEO, said the acquisition will combine “two businesses with highly aligned expertise in markets across the world.” He added that he views the deal as something that will give “clients, partners, employees and other key stakeholders” new business opportunities.

Deal Specifics

Once the acquisition is complete, Assurant becomes a wholly owned subsidiary of TWG Holdings Ltd., whose name will be changed to Assurant Ltd. Assurant shareholders will own 77 percent of the combined company, and existing Assurant shares will be converted into shares of Assurant Ltd. on a one-for-one basis. TPG and its affiliates will own the remaining 23 percent of the combined company, equal in value to 16 million Assurant shares – worth $1.5 billion at Assurant’s Oct. 17 closing price.

Additionally, Assurant will pay $372 million in cash to TPG. The combined company will keep Assurant’s New York Stock Exchange ticker symbol AIZ, and Assurant’s senior management team will lead the combined organization.

The combined company will have 15 directors on its board, including Assurant’s 12 current directors, Chai; Eric Leathers, a Partner at TPG Capital and Peter McGoohan, Principal at TPG Capital.

Assurant said it will use new debt and preferred securities to be issued after the closing to finance the acquisition – which includes the use of cash and repayment of $591 million of The Warranty Group’s existing debt. Assurant has committee to a $1 billion bridge facility as part of this.

By the end of 2019, Assurant said it will produce about $60 million of pre-tax operating synergies through the deal, and “optimizing global operations.”

Assurant is based in New York City, and The Warranty Group is headquartered in Chicago.

Source: Assurant, The Warranty Group, TPG Capital

Topics Mergers & Acquisitions