REG - Randall & Quilter Ld - Recommended Acquisition of R&Q Investment Holdings
01/04/2022 07:00
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RNS Number : 8814G Randall & Quilter Inv Hldgs Ltd 01 April 2022
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION.
INVESTORS SHOULD NOT MAKE ANY INVESTMENT DECISION IN RELATION TO RANDALL &
QUILTER SHARES EXCEPT ON THE BASIS OF THE INFORMATION IN THE CIRCULAR, WHICH
IS PROPOSED TO BE PUBLISHED IN DUE COURSE.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
THE MARKET ABUSE REGULATION (EU) NO. 596/2014 AND ARTICLE 7 OF THE MARKET
ABUSE REGULATION (EU) NO. 596/2014 (AS IT FORMS PART OF THE LAWS OF THE UK BY
VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 (AS AMENDED)).
1 April 2022
RECOMMENDED ACQUISITION
of
Randall & Quilter Investment Holdings Ltd
by
Brickell PC Insurance Holdings LLC
and
commitment to provide $100 million of new equity funding
Summary
· Brickell PC Insurance Holdings LLC ("Brickell") and Randall &
Quilter Investment Holdings Ltd ("R&Q") are pleased to announce that they
have agreed the terms of a recommended cash acquisition of the entire issued
ordinary share capital of R&Q by Brickell (the "Acquisition") as well as
$100 million of new equity funding (the "New Equity Funding"). The Acquisition
will be undertaken by way of a merger under the Bermuda Companies Act.
· Under the terms of the Acquisition, each R&Q Shareholder will
be entitled to receive:
175 pence in cash for each R&Q Share
valuing R&Q's existing issued share capital at approximately £482
million.
· The price of 175 pence per R&Q Share represents:
o a premium of approximately 20 per cent. to the Closing Price per R&Q
Share of 146 pence on 31 March 2022 (being the last practicable dealing day
prior to the date of this announcement)(1);
o a premium of approximately 17 per cent. to the 30 day volume weighted
average share price for the period ended 31 March 2022(1);
o 1.82x price to Tangible Net Asset Value per share based on estimated
figures for 31 December 2021(1); and
o 1.65x price to Net Asset Value per share based on estimated figures for 31
December 2021(1).
· In addition, Brickell has committed to provide new equity funding
to R&Q of $100 million to de-lever R&Q's balance sheet and improve the
Group's financial profile following new management's in-depth review of the
Group's Legacy Insurance portfolio.
· The Acquisition and New Equity Funding will be conditional on,
among other things, the approval by R&Q Shareholders of various matters at
the General Meeting, receipt of Regulatory Clearances and the satisfaction (or
waiver) of the other Conditions set out in Section 1 of Appendix III of this
announcement. It is currently expected that a Circular will be posted around
the week of April 25(th) 2022 with the General Meeting expected to be held
around the week of May 23(rd) 2022, and the Acquisition is expected to become
effective around April 2023 (although may be extended in certain
circumstances), subject to receipt of Regulatory Clearances and to the
satisfaction (or waiver) of the other Conditions.
· The R&Q Directors believe the terms of the Acquisition and
New Equity Funding are in the best interests of shareholders and, accordingly,
intend to recommend unanimously that R&Q Shareholders vote in favour of
the various resolutions to approve the Acquisition and the New Equity Funding
and related matters, which are to be proposed at the General Meeting. In
addition, the R&Q Directors have irrevocably undertaken to vote or procure
votes in favour of such resolutions in respect of their holdings of R&Q
Shares, in aggregate, representing 9,102,904 outstanding R&Q Shares and
constituting approximately 3.31 per cent. of R&Q's issued share capital as
at 31 March 2022 (being the latest practicable date prior to the date of this
announcement).
· Barclays Bank PLC (acting through its Investment Bank)
("Barclays") and Numis Securities Limited ("Numis") are acting as financial
advisors to R&Q on the Acquisition.
Information relating to Brickell
· Brickell and its affiliates currently have a 23.2% shareholding
in R&Q but 9.9% voting rights in R&Q. In March 2019, Brickell made its
initial investment in R&Q by acquiring a 9.0% shareholding. In April 2020,
Brickell purchased an additional $80 million of exchangeable preferred stock
of a R&Q affiliate. In January 2021, Brickell exchanged the preferred
stock to equity in R&Q but remained at 9.9% voting interest in R&Q
following the receipt of relevant regulatory approvals. As a result of the
terms of the conversion documents and R&Q's Bye-laws, Brickell and its
affiliates currently only have the ability to exercise voting rights equal to
9.9% of the current total voting rights in R&Q without obtaining relevant
regulatory approvals.
· Brickell is controlled by Steven W. Pasko who has over thirty
five years of financial services experience. Brickell's principal economic
investor is 777 Partners LLC ("777"). 777 is a global investment firm
headquartered in Miami, Florida. The firm invests across six verticals;
insurance, consumer and commercial finance, litigation finance, sports media
and entertainment, aviation, and direct lending. As 777's non-voting ownership
interest in Brickell does not include any ability for 777 to exercise board
control or any other ability to direct or cause the direction of management or
policies of Brickell, 777 does not exercise control over Brickell.
· Brickell PC2 Insurance Holdings Limited will be incorporated in
Bermuda in 2022 for purposes of merging with R&Q. Brickell PC2 Insurance
Holdings Limited will merge with and into R&Q with the result that R&Q
will be the surviving company of the Merger. As a result of the Merger,
R&Q will become an indirect wholly-owned subsidiary of Brickell. After
completion of the Merger, R&Q would be owned by Brickell which will then
be the holding company of both R&Q and Brickell's other existing insurance
operations.
Information relating to R&Q
· R&Q has been operating in the insurance industry for over 30
years and is a leading non-life global specialty insurance company focusing on
Program Management and Legacy Insurance businesses. The company is
incorporated in Bermuda, with operations in the US, UK, Europe and Bermuda and
has 308 employees across 8 offices.
· FY 2021 was a pivotal year for R&Q as the Legacy Insurance
business took a significant step towards its transformation into a capital
lighter, more recurring fee-based business model through the formation of
Gibson Re, a Bermuda-domiciled collateralised reinsurer with c.$300 million of
third-party capital. The launch of Gibson Re as a legacy sidecar reinsurer for
80% of R&Q's Legacy Insurance business, simplifies the Legacy Insurance
revenue model from one that is episodic and capital intensive towards one that
is capital lighter with more predictable and recurring annual fee income.
However, as discussed at the time of R&Q's H1 2021 interim results, this
repositioning of Legacy Insurance inevitably results in a temporary reduction
to R&Q's earnings as Legacy Insurance transitions from upfront 'Day One'
underwriting income to annual recurring fee income. Under new accounting
standards due to become effective in FY 2023, 'Day One' underwriting income
will not be permitted.
· The Group's Program Management business continued its growth with
gross written premiums ("GWP") expected to reach $1 billion(2) for FY 2021, a
92% increase versus FY 2020, due to growth in new programs and the seasoning
of existing programs. This is expected to drive fee income growth for Program
Management of 133% to $56 million(2), which includes income from the Group's
40% ownership in the Tradesman Program Managers MGA. Program Management
pre-tax operating profit is expected to reach $21 million(2) with a pre-tax
operating profit margin of c.35%.
· The Group's Legacy Insurance business is currently expecting to
complete 15 Legacy Insurance deals for FY 2021, reflecting $726 million of
gross reserves acquired compared with $640 million of reserves acquired in FY
2020. Given that not all of the Legacy Insurance transactions have been
completed, this outlook is still subject to change. Gibson Re began assuming
risk in 4Q 2021 representing $367 million of Reserves Under Management ("RUM")
at YE 2021 with annual recurring fee income of $16 million for the Group;
however these fees will not be recognized until FY 2022. Had the Group not
had the benefit of Gibson Re, it would have required an additional c.$100
million of capital to fund its Legacy Insurance deals. Legacy Insurance is
expecting a pre-tax operating (loss) of c.$(5) million to $(10) million(2) for
FY 2021 primarily due to the unanticipated adverse reserve development of
c.$30 million(2).
· Given that not all of the Legacy Insurance transactions have
completed, the outlook for the Group's FY 2021 pre-tax operating profit
remains variable although management currently anticipates a Group pre-tax
operating (loss) of c.$(20) million to $(30) million(2), which includes
unanticipated adverse reserve development of c.$30 million(2) and unallocated
corporate and interest expense. Pre-tax operating profit is a measure of the
underlying earnings power of the Group and excludes non-recurring items.
· The Group anticipates achieving c.$90 million in run-rate pre-tax
operating profit by the end of FY 2023. This is due to significant operating
leverage as the business achieves scale, which the Group believes is
underpinned by the ongoing growth in its Program Management business and the
ability to deploy Gibson Re's capital. The Group also expects to achieve $1.75
billion of Program Management GWP in FY 2022, one year earlier than previously
reported. As the Company continues its transformational journey to becoming
primarily a recurring fee-based business by FY 2024, it currently anticipates
a pre-tax operating profit for FY 2022 of between $8 million and $15 million.
In FY 2022, the Group is expecting to incur c.$20 million of one-time charges
primarily associated with an efficiency initiative to automate R&Q's
business processes, which are not included in pre-tax operating profit. This
initiative is anticipated to yield meaningful annual cost savings by FY 2024.
· The new R&Q management team took over in April 2021 and
initiated an in-depth review of the Group's Legacy Insurance portfolio in Q4
2021. The review identified a potential c.$90 million(2) non-cash, pre-tax
charge associated with impairing a structured reinsurance contract that was
previously capitalised as an asset on the Group's balance sheet. The
impairment is due to the likely commutation of this reinsurance contract by a
subsidiary to provide liquidity to meet anticipated claims which have recently
accelerated above expectations. This subsidiary was acquired over 15 years ago
and management believes it is in the best interest of shareholders to commute
the reinsurance policy rather than fund future claims out of Group liquidity.
Furthermore, in Q4 2021, the Group used meaningful cash capacity to fund
collateral requirements upon certain reserve strengthening. The combined
impact of these two items results in a need for c.$100 million of equity
capital to de-lever the balance sheet and improve the Group's financial
profile. The result of the charge and other non-operating items is an
IFRS-based profit after-tax (loss) of c.$(135) million to $(145) million(2).
Commenting on the Acquisition, Steven Pasko, Chairman of Brickell, said:
"We have enjoyed a strong relationship with R&Q as a shareholder since
2019 and further supported the business with an infusion of capital in 2020.
We are excited about the prospect of integrating R&Q into our robust
insurance ecosystem and expanding our business into the legacy space, by
combining R&Q's deep experience in managing complex run-off claims with
777's unique asset management capabilities."
Commenting on the Acquisition, William Spiegel, Executive Chairman of R&Q,
said:
"Having agreed with Brickell the terms for a recommended cash acquisition of
R&Q and $100 million new equity funding, the Board of R&Q is unanimous
in its belief that this represents the best outcome for our shareholders. The
Acquisition provides shareholders the opportunity to crystallise the value of
their holdings, in cash, and at a material 20% premium to our undisturbed
share price, and a substantial 1.82x multiple of expected FY 2021 Tangible Net
Asset Value per share, while also providing $100 million in new equity funding
to de-lever our balance sheet and improve our financial profile.
Furthermore, the offer demonstrates the strength of both our business today
and the opportunities ahead of us. The value Brickell sees in R&Q is
testament to the clear strategic vision we have outlined, the quality of our
Legacy Insurance and Program Management businesses and the skills and
expertise of our people. Brickell is a long-term strategic partner that has a
deep understanding of our business and our markets, and has bought into our
five-year plan to transform R&Q into a fee-based, capital lighter
business. In addition to enabling our shareholders to realise attractive
value, we also believe that an acquisition by Brickell would be an excellent
outcome for our trading partners and employees, with Brickell's existing
presence and significant ambitions in the fronting and legacy sectors highly
complementary to our business. I would like to thank our people for their
ongoing commitment as we continue to focus on business as usual and delivering
our strategy."
This summary should be read in conjunction with, and is subject to, the full
text of the following announcement and its Appendices.
The Acquisition will be subject to the Conditions that are set out in Section
1 of Appendix III of this announcement. Appendix I contains information on the
sources of information and bases of calculation used in this summary and in
the following announcement. Appendix II contains a summary of the irrevocable
undertakings referred to in this summary and in the following announcement.
Appendix III contains a summary of the key terms of the Implementation
Agreement. Appendix IV contains definitions of terms used in this summary and
in the following announcement.
Enquiries
Brickell
Tel: +1 305 921 2855
Steven Pasko,
Chairman
Gayle Levy, General
Counsel
R&Q
Tel: +44 (0) 207 780 5850
William
Spiegel
Tom
Solomon
Barclays (Financial Advisor to R&Q)
Tel: +44 (0)20 7623 2323
Nishant Amin
Milan Solanki
Numis (Financial Advisor and Nominated Advisor to
R&Q)
Tel: +44 (0)20 7260 1000
Charles Farquhar
Giles Rolls
Stuart
Ord
GC Securities (Financial Advisor to
Brickell)
Tel: +44 (0)20 357 1000
Andrew Beecroft
Ed Hochberg
David Rushworth
FTI Consulting (Financial PR for R&Q)
Tom
Blackwell
Tel: +44 (0)7747 113919
Important Notices
Barclays Bank PLC, acting through its Investment Bank ("Barclays"), which is
authorised by the Prudential Regulation Authority and regulated in the United
Kingdom by the FCA and the Prudential Regulation Authority, is acting
exclusively for R&Q and no one else in connection with the Acquisition and
will not be responsible to anyone other than R&Q for providing the
protections afforded to clients of Barclays nor for providing advice in
relation to the Acquisition or any other matter referred to in this
Announcement.
Numis Securities Limited ("Numis"), which is authorised and regulated in the
United Kingdom by the FCA, is acting exclusively for R&Q and no one else
in connection with the matters set out in this announcement and will not
regard any other person as its client in relation to the matters in this
announcement and will not be responsible to anyone other than R&Q for
providing the protections afforded to clients of Numis, nor for providing
advice in relation to any matter referred to herein.
MMC Securities Limited ("trading as GC Securities, ("GC Securities"), which is
authorised and regulated in the United Kingdom by the FCA, is acting
exclusively for Brickell and no one else in connection with the matters set
out in this announcement and will not regard any other person as its client in
relation to the matters in this announcement and will not be responsible to
anyone other than Brickell for providing the protections afforded to clients
of GC Securities, nor for providing advice in relation to any matter referred
to herein.
The City Code on Takeovers and Mergers
By virtue of its status as a Bermuda incorporated company, the Code does not
apply to R&Q. R&Q has incorporated certain takeover-related provisions
into its Bye-Laws but these do not provide R&Q Shareholders with the full
protections offered by the Code and enforcement of such provisions are the
responsibility of R&Q, not the Panel.
Further Information
This announcement is for information purposes only and is not intended to and
does not constitute, or form any part of, an offer to sell or an invitation to
purchase or subscribe for any securities or the solicitation of any vote or
approval in any jurisdiction pursuant to the Acquisition or otherwise, nor
shall there be any sale, issuance or transfer of securities of R&Q in any
jurisdiction in contravention of applicable law. The Acquisition will be made
solely pursuant to the terms of the Circular, which will contain the full
terms and conditions of the Acquisition, including details of how to vote in
respect of the Acquisition and accompanied by forms of proxy and forms of
instruction for use at the General Meeting. Any decision in respect of, or in
response to, the Acquisition should be made only on the basis of the
information in the Circular. R&Q Shareholders are advised to read the
Circular and any other formal documentation published in relation to the
Acquisition carefully, once it has been published or dispatched.
This announcement has been prepared for the purpose of complying with Bermuda
and English law and the information disclosed may not be the same as that
which would have been disclosed if this announcement had been prepared in
accordance with the laws of jurisdictions outside the United Kingdom and
Bermuda.
This announcement does not constitute a prospectus or prospectus equivalent
document.
Overseas Shareholders
The laws of the relevant jurisdictions may affect the availability of the
Acquisition to persons who are not resident in the United Kingdom, the United
States or Bermuda. Persons who are not resident in the United Kingdom, the
United States or Bermuda or who are subject to laws of any jurisdiction other
than the United Kingdom, the United States or Bermuda, should inform
themselves about, and observe, any applicable requirements. In particular, the
ability of R&Q Shareholders who are not resident in the United Kingdom,
the United States or Bermuda to vote their R&Q Shares with respect to the
Acquisition at the General Meeting may be affected by the laws of the relevant
jurisdiction in which they are located. Any person (including, without
limitation, nominees, trustees and custodians) who would, or otherwise intends
to, forward this announcement, the Circular or any accompanying document to
any jurisdiction outside the United Kingdom, the United States or Bermuda
should refrain from doing so and seek appropriate professional advice before
taking any action.
Notice to US investors
The Acquisition relates to the shares of a Bermuda company and is being made
by means of a merger provided for under the Bermuda Companies Act. The
transaction, implemented by way of a merger is not subject to the tender offer
rules or the proxy solicitation rules under the U.S. Securities Exchange Act
of 1934, as amended. Accordingly, the Acquisition is subject to the disclosure
requirements and practices applicable to a merger involving a target company
in Bermuda quoted on the Alternative Investment Market operated by the London
Stock Exchange, which differ from the disclosure requirements of United States
tender offer and proxy solicitation rules. If, in the future, Brickell
exercises its right to implement the Acquisition by way of a Takeover Offer
and determines to extend the Takeover Offer into the United States, the
Acquisition will be made in compliance with applicable United States laws and
regulations.
Each R&Q Shareholder is urged to consult their independent professional
adviser immediately regarding the tax consequences of the Acquisition
applicable to them, including under applicable United States state and local,
as well as overseas and other, tax laws.
Financial information relating to R&Q included in this announcement and
the Circular has been or shall have been prepared in accordance with
accounting standards applicable in the United Kingdom and may not be
comparable to financial information of US companies or companies whose
financial statements are prepared in accordance with generally accepted
accounting principles in the United States.
R&Q is organised under the laws of a country other than the United States.
Some of the officers and directors of R&Q are residents of countries other
than the United States. In addition, substantial assets of R&Q are located
outside the United States. As a result, it may be difficult for R&Q
Shareholders to effect service of process within the United States upon
R&Q or its officers or directors or to enforce against them a judgment of
a US court predicated upon the federal or state securities laws of the United
States.
Forward-Looking Statements
This announcement contains forward-looking statements, both with respect to
Brickell and R&Q and their industries, that reflect their current views
with respect to future events and financial performance. Statements that are
not historical facts, including statements about Brickell's or R&Q's
beliefs, plans or expectations, are forward-looking statements. These
statements are based on current plans, estimates and expectations, all of
which involve risk and uncertainty. Statements that include the words
"expect," "intend," "plan," "believe," "project," "anticipate," "may", "could"
or "would" or similar statements of a future or forward-looking nature
identify forward-looking statements. Actual results may differ materially from
those included in such forward-looking statements and therefore you should not
place undue reliance on them.
A non-exclusive list of the important factors that could cause actual results
to differ materially from those in such forward-looking statements includes:
(a) changes in the size of claims relating to natural or man-made catastrophe
losses due to the preliminary nature of some reports and estimates of loss and
damage to date; (b) trends in rates for property and casualty insurance and
reinsurance; (c) the timely and full recoverability of reinsurance placed by
Brickell or R&Q with third parties, or other amounts due to Brickell or
R&Q; (d) changes in the projected amount of ceded reinsurance recoverables
and the ratings and credit worthiness of reinsurers; (e) actual loss
experience from insured or reinsured events and the timing of claims payments
being faster or the receipt of reinsurance recoverables being slower than
anticipated; (f) increased competition on the basis of pricing, capacity,
coverage terms or other factors such as the increased inflow of third party
capital into reinsurance markets, which could harm either Brickell's or
R&Q's ability to maintain or increase its business volumes or
profitability; (g) greater frequency or severity of claims and loss activity
than Brickell's or R&Q's respective underwriting, reserving or investment
practices anticipate based on historical experience or industry data; (h)
changes in the global financial markets, including the effects of inflation on
Brickell's or R&Q's business, including on pricing and reserving,
increased government involvement or intervention in the financial services
industry and changes in interest rates, credit spreads, foreign currency
exchange rates and future volatility in the world's credit, financial and
capital markets that adversely affect the performance and valuation of either
Brickell's or R&Q's investments, financing planning and access to such
markets or general financial condition; (i) changes in ratings, rating agency
policies or practices; (j) the potential for changes to methodologies,
estimations and assumptions that underlie the valuation of Brickell's or
R&Q's respective financial instruments that could result in changes to
investment valuations; (k) changes to Brickell's or R&Q's respective
assessment as to whether it is more likely than not that it will be required
to sell, or has the intent to sell, available-for-sale debt securities before
their anticipated recovery; (l) the ability of Brickell's or R&Q's
subsidiaries to pay dividends; (m) the potential effect of legislative or
regulatory developments in the jurisdictions in which Brickell or R&Q
operates, such as those that could impact the financial markets or increase
their respective business costs and required capital levels, including but not
limited to changes in regulatory capital balances that must be maintained by
operating subsidiaries and governmental actions for the purpose of stabilizing
the financial markets; (n) the actual amount of new and renewal business and
acceptance of products and services, including new products and services and
the materialization of risks related to such products and services; (o)
changes in applicable tax laws, tax treaties or tax regulations or the
interpretation or enforcement thereof; (p) the effects of mergers,
acquisitions, divestitures and retrocession.
No Profit Forecasts or Estimates
No statement in this announcement is intended as a profit forecast or estimate
of the future financial performance of R&Q following completion of the
Acquisition for any period unless otherwise stated. Furthermore, no statement
in this announcement should be interpreted to mean that earnings or earnings
per R&Q Share for R&Q for the current or future financial years would
necessarily match or exceed the historical published earnings or earnings per
R&Q Share.
Disclosure Requirements
R&Q is a Bermuda company and is therefore not subject to the Code.
Accordingly, shareholders of R&Q and others dealing in R&Q Shares are
not obliged to disclose any of their dealings under the provisions of the
Code. However, shareholders of R&Q and others dealing in R&Q Shares
are still obliged to comply with the disclosure obligations under the
Bye-laws, the AIM Rules and the UK Market Abuse Regulation.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION.
INVESTORS SHOULD NOT MAKE ANY INVESTMENT DECISION IN RELATION TO RANDALL &
QUILTER SHARES EXCEPT ON THE BASIS OF THE INFORMATION IN THE CIRCULAR, WHICH
IS PROPOSED TO BE PUBLISHED IN DUE COURSE.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
THE MARKET ABUSE REGULATION (EU) NO. 596/2014 AND ARTICLE 7 OF THE MARKET
ABUSE REGULATION (EU) NO. 596/2014 (AS IT FORMS PART OF THE LAWS OF THE UK BY
VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 (AS AMENDED)).
1 April 2022
RECOMMENDED ACQUISITION
of
Randall & Quilter Investment Holdings Ltd
by
Brickell PC Insurance Holdings LLC
and
commitment to provide $100 million of new equity funding
1. Introduction
Brickell and R&Q are pleased to announce that they have agreed the terms
of a recommended cash acquisition of the entire issued ordinary share capital
of R&Q by Brickell, as well as $100 million of new equity funding.
It is intended that the Acquisition will be effected by means of a merger
under the Bermuda Companies Act, involving the merger of BB Sub with and into
R&Q such that R&Q is the surviving company, under Section 104H of the
Bermuda Companies Act. BB Sub will be a Bermuda exempted company incorporated
for the purposes of the Merger by, and wholly-owned by Brickell.
2. The Acquisition
The Acquisition will be subject to the Conditions set out below in Section 1
of Appendix III of this announcement.
Under the terms of the Acquisition, each R&Q Shareholder will be entitled
to receive:
175 pence in cash for each R&Q Share
valuing R&Q's existing issued share capital at approximately £482
million.
The price of 175 pence per R&Q Share represents:
· a premium of approximately 20 per cent. to the Closing Price per
R&Q Share of 146 pence on 31 March 2022 (being the last practicable
dealing day prior to the date of this announcement)(1);
· a premium of approximately 17 per cent. to the 30 day volume
weighted average share price for the period ended 31 March 2022(1);
· 1.82x price to Tangible Net Asset Value per share based on
estimated figures for 31 December 2021(1); and
· 1.65x price to Net Asset Value per share based on estimated
figures for 31 December 2021(1).
In addition, Brickell has committed to provide new equity funding to R&Q
of $100 million to de-lever R&Q's balance sheet and improve the Group's
financial profile following new management's in-depth review of the Group's
Legacy Insurance portfolio.
3. Background to and Reasons for the Acquisition
As the largest existing shareholder in R&Q with a 23.2% shareholding,
Brickell has enjoyed a strong relationship with R&Q since making its
initial investment in 2019. This Acquisition and New Equity Funding
demonstrate Brickell's continued support of the business and represents a
unique opportunity for Brickell to expand its insurance strategy into the
legacy market. R&Q's Program Management business also represents an
attractive complement to Brickell's existing program management operations,
known as the Sutton National Group.
4. Recommendation
The R&Q Directors believe the Acquisition and New Equity Funding together
are in the best interests of shareholders and intend to recommend unanimously
that R&Q Shareholders vote in favour of the resolutions to approve the
Acquisition and the New Equity Funding, which are to be proposed at the
General Meeting.
In addition, the R&Q Directors have irrevocably undertaken to vote or
procure votes in favour of such resolutions in respect of their holdings of
R&Q Shares, in aggregate, representing 9,102,904 outstanding R&Q
Shares and constituting approximately 3.31 per cent. of R&Q's issued share
capital as at 31 March 2022 (being the latest practicable date prior to the
date of this announcement).
5. Background to and Reasons for the Recommendation
As set out in paragraph 6 below, the R&Q Board has concluded that it is in
the best interest of the Group to incur a non-cash pre-tax operating charge of
c.$90 million(2) in FY 2021.
To better capitalise the business and de-lever its balance sheet following
this c.$90 million(2) non-cash pre-tax operating charge, R&Q expects to
have an equity capital need of c.$100 million that will provide sufficient
capital to cure potential covenant breaches ahead of the expiry of waivers in
June 2022 and strengthen its financial standing for all stakeholders,
including debt financiers and rating agencies.
R&Q separately received an approach from Brickell and following a period
of negotiations a proposal to acquire the entire issued share capital of
R&Q for 175 pence per share, together with a firm commitment to provide
the New Equity Funding required by R&Q. The Acquisition provides R&Q
Shareholders the opportunity to crystallise the value of their holdings, in
cash, at a material premium to the current share price and a substantial
premium to the expected FY 2021 Tangible Net Asset Value per share(1). The
price of 175 pence per R&Q Share represents:
· a premium of approximately 20 per cent. to the Closing Price per
R&Q Share of 146 pence on 31 March 2022 (being the last practicable
dealing day prior to the date of this announcement)(1);
· a premium of approximately 17 per cent. to the 30 day volume
weighted average share price for the period ended 31 March 2022(1);
· 1.82x price to Tangible Net Asset Value per share based on
estimated figures for 31 December 2021(1); and
· 1.65x price to Net Asset Value per share based on estimated
figures for 31 December 2021(1).
In the absence of the Acquisition and the New Equity Funding, R&Q intends
to carry out a non-pre-emptive equity raise of c.$100 million in H1 2022.
In the days prior to this Announcement, R&Q management discussed R&Q's
potential c.$100 million capital requirement with key shareholders as well as
the Acquisition and the New Equity Funding.
Following these shareholder discussions, and taking into account, amongst
other things, the current market environment for any potential capital
raise, the R&Q Directors believe it is in the best interests of R&Q
Shareholders to vote in favour of the Acquisition and the New Equity Funding.
The R&Q Directors therefore intend to recommend unanimously that R&Q
Shareholders vote in favour of the resolutions to approve the Acquisition and
the New Equity Funding.
6. New Equity Funding
Pursuant to the terms of a Purchase and Exchange Agreement, Brickell shall
commit to invest an additional $100 million in newly issued exchangeable
preferred securities of a subsidiary of R&Q.
Background to and Reasons for the New Equity Funding
The new R&Q management team took over in April 2021 and initiated an
in-depth review of the Group's Legacy Insurance portfolio in Q4 2021. The
review identified a potential c.$90 million(2) non-cash, pre-tax charge
associated with impairing a structured reinsurance contract that was
previously capitalised as an asset on the Group's balance sheet. The
impairment is due to the likely commutation of this reinsurance contract by a
subsidiary to provide liquidity to meet anticipated claims which have recently
accelerated above expectations. This subsidiary was acquired over 15 years ago
and management believes it is in the best interest of shareholders to commute
the reinsurance policy rather than fund future claims out of Group liquidity.
Furthermore, in Q4 2021, the Group used meaningful cash capacity to fund
collateral requirements upon certain reserve strengthening. The combined
impact of these two items results in a need for c.$100 million of equity
capital to de-lever the balance sheet and improve the Group's financial
profile. The Group has received pre-emptive waivers from its bank lenders on
its existing financial covenants until the earlier of a capital raise or the
end of June 2022. In the absence of a capital raise or an extension of the
waiver, it is likely that the Group would be in breach once the current
waivers expire.
Purchase and Exchange Agreement
On 1 April 2022, Brickell and R&Q entered into a Purchase and Exchange
Agreement with regard to the purchase by Brickell of a number of shares (the
"Preferred Stock") to be newly issued by Randall & Quilter PS Holdings
Inc., a subsidiary of R&Q (the "Issuer").
The Preferred Stock shall be issued in two tranches: $70 million of the
Preferred Stock shall be issued in June 2022 conditional on, amongst other
things, the receipt of the approval of R&Q Shareholders of the Acquisition
and New Equity Funding; and the remaining $30 million of the Preferred Stock
shall be issued in August 2022.
The Issuer will dividend and/or loan the proceeds from the transaction to its
parent and a direct subsidiary of R&Q, RQIH Limited, which will be applied
in accordance with an agreed sources and uses budget.
The Preferred Stock is not to be transferable except with R&Q's and the
Issuer's prior written consent and in accordance with applicable securities
laws.
In the event that the Acquisition does not complete, the Preferred Stock will
either be marketed for secondary sale by R&Q on behalf of Brickell or will
be redeemed (subject to necessary approvals at the time) or may, subject to
any necessary regulatory or other approvals at the time, be exchanged for
R&Q Shares. The Exchange Price agreed upon per R&Q share is £1.15,
based on the GBP-USD exchange rate on the date immediately prior to
announcement of GBP£1.00 = USD$1.32.
7. Irrevocable Undertakings
Brickell has received irrevocable undertakings to vote, or procure votes, in
favour of the resolutions to approve the Acquisition and the New Equity
Funding, which are to be proposed at the General Meeting, from the directors
of R&Q, in respect of 9,102,904 R&Q Shares, in aggregate, representing
approximately 3.31 per cent. of the issued share capital of R&Q on 31
March 2022 (being the latest practicable date prior to the date of this
announcement).
The irrevocable undertakings provided by the directors of R&Q will cease
to be binding if the Acquisition lapses or is withdrawn or if the
Implementation Agreement is terminated and will remain binding if a higher
competing offer is made for R&Q.
Further details of these irrevocable undertakings, including the circumstances
in which they cease to apply, are set out in Appendix II.
8. Carve Out Acquisition
Brickell and R&Q have agreed to cooperate, engage in discussions and use
all reasonable endeavours to enable Brickell, prior to the completion of the
Acquisition, to acquire parts of R&Q's business, including those entities
comprising R&Q's Program Management business, as and when applicable
Regulatory Clearances have been obtained, potentially allowing for an earlier
payment to shareholders (each, a "Carve Out Acquisition").
The members of the R&Q Group forming part of the Carve Out Acquisition
("Carve Out Companies") will be acquired by Brickell prior to completion of
the Merger and all members of the R&Q Group not so acquired will remain as
subsidiaries of R&Q and will become indirect subsidiaries of Brickell
following completion of the Merger on the Closing Date.
On completion of any Carve Out Acquisition, Brickell shall pay to R&Q
consideration for the relevant Carve Out Companies, representing fair market
value for such Carve Out Companies, as mutually determined by R&Q and
Brickell (the "Carve Out Consideration").
The terms of any Carve Out Acquisition shall be structured so as to ensure
that R&Q is able to and does pay an amount equal to such Carve Out
Consideration to the R&Q Shareholders who hold R&Q Shares (such
payment to be by way of dividend, distribution, return of capital or other
mechanism to be agreed with Brickell pursuant to the terms of any Carve Out
Acquisition).
In the event that Closing has not occurred following a Carve Out Acquisition,
on the earlier of: (a) the date falling 12 months after the date of completion
of the Carve Out Acquisition or (b) an earlier date if Brickell so elects (the
"Carve Out Acquisition Payment Date"), Brickell shall pay an amount to R&Q
sufficient to enable R&Q to make a payment to the R&Q Shareholders
equal to the Acquisition Consideration less the Carve Out Consideration and
regardless of whether Closing subsequently takes place, the R&Q
Shareholders shall not receive any further payment in respect of the
Acquisition or the Merger.
Accordingly, if a Carve Out Acquisition is completed, R&Q Shareholders
shall then become entitled to receive amounts totaling, in aggregate, the
Acquisition Consideration regardless of whether any remaining Conditions
(including the obtaining of any Regulatory Clearances) are satisfied or
waived.
It is not anticipated that the Acquisition, together with any Carve Out
Acquisition, will constitute a 'fundamental change of business' for the
purposes of AIM Rule 15 and, accordingly, R&Q and Brickell do not expect
any Carve Out Acquisition to need to be conditional upon R&Q Shareholder
approval. In the event that R&Q Shareholder approval is required pursuant
to AIM Rule 15 (whether for the purpose of the implementation of any Carve Out
Acquisition or otherwise), such shareholder approval will either be sought at
the General Meeting or, if it is not possible to seek such shareholder
approval at the General Meeting (due to timing constraints or the status of
discussions in relation to any Carve Out Acquisition) then such shareholder
approval will be sought at a subsequent special general meeting.
Further details on the Carve Out Acquisition are included in Section 6 of
Appendix III of this announcement.
9. Information on Brickell
Brickell is controlled by MTCP LLC, a Delaware limited liability company owned
by Mr. Steven Pasko. Mr. Pasko is the Chairman of Brickell and has over thirty
five years of financial services experience. Mr. Pasko is also a managing
partner of 777, the principal economic investor in Brickell.
777 is a global investment firm headquartered in Miami, Florida. The firm
invests across six verticals: insurance, consumer and commercial finance,
litigation finance, sports media and entertainment, aviation and direct
lending. Founded in 2015 as the result of the management buyout of SuttonPark
Capital from PennantPark, a publicly traded BDC, 777 is focused on creating
positive economic impact and long-term value for its portfolio companies and
stakeholders. 777 has the benefit of deploying permanent capital with a
long-term approach to all investments and has grown to over $7.5 billion in
assets and over 50 portfolio companies across 6 business lines with interests
in a broad spectrum of financial services businesses, specialty finance
companies, asset originators, and financial technology and service providers.
As 777's non-voting ownership interest in Brickell does not include any
ability for 777 to exercise board control or any other ability to direct or
cause the direction of management or policies of Brickell, 777 does not
exercise control over Brickell.
Brickell PC2 Insurance Holdings Limited will be incorporated in Bermuda in
2022 for purposes of merging with R&Q. Brickell PC2 Insurance Holdings
Limited will merge with and into R&Q with the result that R&Q will be
the surviving company of the Merger. As a result of the Merger, R&Q will
become an indirect wholly-owned subsidiary of Brickell. After completion of
the Merger, R&Q would be owned by Brickell which will then be the holding
company of both R&Q and Brickell's other existing insurance operations.
Brickell and its affiliates currently have a 23.2% shareholding in R&Q but
9.9% voting rights in R&Q. In March 2019, Brickell made its initial
investment in R&Q by acquiring a 9.0% shareholding. In April 2020,
Brickell purchased an additional $80 million of exchangeable preferred stock
of a R&Q affiliate. In January 2021, Brickell exchanged the preferred
stock to equity in R&Q but remained at 9.9% voting interest in R&Q
following the receipt of relevant regulatory approvals. As a result of the
terms of the conversion documents and R&Q's Bye-laws, Brickell and its
affiliates currently only have the ability to exercise voting rights equal to
9.9% of the current total voting rights in R&Q without obtaining relevant
regulatory approvals.
10. Information on R&Q
R&Q has been operating in the insurance industry for over 30 years and is
a leading non-life global specialty insurance company focusing on Program
Management and Legacy Insurance businesses. The company is incorporated in
Bermuda, with operations in the US, UK, Europe and Bermuda and has 308
employees across 8 offices.
FY 2021 was a pivotal year for R&Q as the Legacy Insurance business took a
significant step towards its transformation into a capital lighter, more
recurring fee-based business model through the formation of Gibson Re, a
Bermuda-domiciled collateralised reinsurer with c.$300 million of third-party
capital. The launch of Gibson Re as a legacy sidecar reinsurer for 80% of
R&Q's Legacy Insurance business, simplifies the Legacy Insurance revenue
model from one that is episodic and capital intensive, towards one that is
capital lighter with more predictable and recurring annual fee income.
However, as discussed at the time of R&Q's H1 2021 interim results, this
repositioning of Legacy Insurance inevitably results in a temporary reduction
to R&Q's earnings as Legacy Insurance transitions from upfront 'Day One'
underwriting income to annual recurring fee income. Under new accounting
standards due to become effective in FY 2023, 'Day One' underwriting income
will not be permitted.
The Group's Program Management business continued its growth with GWP expected
to reach $1 billion(2) for FY 2021, a 92% increase versus FY 2020, due to
growth in new programs and the seasoning of existing programs. This is
expected to drive fee income growth for Program Management of 133% to $56
million(2), which includes income from the Group's 40% ownership in the
Tradesman Program Managers MGA. Program Management pre-tax operating profit is
expected to reach $21 million(2) with a pre-tax operating profit margin of
c.35%.
The Group's Legacy Insurance business is currently expecting to complete 15
Legacy Insurance deals for FY 2021, reflecting $726 million of gross reserves
acquired compared with $640 million of reserves acquired in FY 2020. Given
that not all of the Legacy Insurance transactions have been completed, this
outlook is still subject to change. Gibson Re began assuming risk in
4Q21 representing $367 million of RUM at YE 2021 with annual recurring fee
income of $16 million for the Group; however, these fees will not be
recognized until FY 2022. Had the Group not had the benefit of Gibson Re, it
would have required an additional c.$100 million of capital to fund its Legacy
Insurance deals. Legacy Insurance is expecting a pre-tax operating (loss) of
c.$(5) million to $(10) million(2) for FY 2021 primarily due to the
unanticipated adverse reserve development of c.$30 million(2).
Given that not all of the Legacy Insurance transactions have completed, the
outlook for the Group's FY 2021 pre-tax operating profit remains variable
although management currently anticipates a Group pre-tax operating (loss) of
c.$(20) million to $(30) million(2), which includes unanticipated adverse
reserve development of c.$30 million(2) and unallocated corporate and interest
expense. Pre-tax operating profit is a measure of the underlying earnings
power of the Group and excludes non-recurring items. The impact of the
non-cash charge and other non-operating items results in a IFRS-based profit
after-tax (loss) of c.$(135) million to $(145) million(2).
The Group anticipates achieving c.$90 million in run-rate pre-tax operating
profit by the end of FY 2023. This is due to significant operating leverage as
the business achieves scale, which the Group believes is underpinned by the
ongoing growth in its Program Management business and the ability to deploy
Gibson Re's capital. The Group also expects to achieve $1.75 billion of
Program Management GWP in FY 2022, one year earlier than previously reported.
As the Company continues its transformational journey to becoming primarily a
recurring fee-based business by FY 2024, it currently anticipates a pre-tax
operating profit for FY 2022 of between $8 million and $15 million. In FY
2022, as the business transitions to a recurring fee-based model it is
expecting to incur c.$20 million of one-time expenses not included in PTOP (to
automate business processes yielding meaningful annual cost savings by FY
2024) which, together with unearned Program Fee revenue and other items, is
expected to result in a IFRS-based post tax loss for FY 2022.
11. Financing
As a Bermuda incorporated company, R&Q is not subject to the provisions of
the Code, including the requirement for the offeror's financial adviser to
give a confirmation that resources are available to the offeror sufficient to
satisfy full acceptance of the offer. Given that the Code does not apply,
the parties have adopted an approach more consistent with US market practice
which relies on contractual protection. Accordingly, Brickell has provided
confirmations in the Implementation Agreement together with an equity
commitment letter and has agreed that an authorized officer of 777 will
provide a certificate, on a quarterly basis on request, to confirm that
Brickell continues to anticipate being able to fund its payment obligations.
In the event that Brickell fails to pay, when due, the Acquisition
Consideration or the amounts due pursuant to the New Equity Funding, such
failure would be a material breach of the Implementation Agreement which would
give R&Q a right to terminate the Implementation Agreement. In the event
that R&Q terminates the Implementation Agreement due to Brickell's
material breach, Brickell will then be required to pay R&Q the $12,500,000
termination fee as explained in paragraph 5 of Appendix III.
12. Management and Employees
Brickell has high regard for the experience of the existing management and
employees of R&Q and sees the input of the existing management team of
R&Q as a key element of the R&Q business strategy going forward.
Consequently, Brickell does not currently intend to make any material changes
to the continued employment, or the balance of the skills and functions, of
R&Q's management and employees as a result of the Acquisition.
Certain senior members of the R&Q management team hold restricted stock
options in the form of issued shares which carry certain contractual
restrictions but which, subject to certain terms and conditions, vest and
become unrestricted over time. As a result of the Acquisition, any such
restricted stock options shall become fully vested and so will be acquired by
Brickell for the Acquisition Consideration pursuant to the Merger, subject to
any deductions under the terms of such restricted stock options.
Management Rollover
The Implementation Agreement sets out the proposed arrangements pursuant to
which 50 per cent. of the after-tax proceeds received by certain of the
R&Q senior management team (the "Managers") from the Acquisition will be
reinvested by the Managers into equity interests of R&Q (the "Rollover").
The terms of the Rollover are subject to agreement on documentation but will
be on the same economic terms as applicable to Brickell's post-Closing equity
investment in the structure for Brickell's ownership of R&Q and will
include customary terms for an equity investment of this nature, including as
to restrictions on transfer, leaver provisions (that provide for a sale at
fair market value of the Rollover equity interests) and drag and tag-along
rights.
Management Incentive Plan
Brickell has also agreed, pursuant to the terms of the Implementation
Agreement, to implement a management incentive plan ("MIP") upon Closing.
The terms of the MIP are subject to documentation, but it is the intention
that under the terms of the MIP, an aggregate amount equivalent to five per
cent. of the post-Closing ordinary share capital of R&Q will be allocated
to certain Managers at Closing. Any equity that has been set aside for
allocation under the MIP and that is not granted at Closing shall be available
for future grants to senior management under the MIP.
Awards pursuant to the MIP will vest in four tranches over a four-year period
on a cliff vesting basis as follows: (a) 10 per cent. year one, (b) 20 per
cent. year two, (c) 30 per cent. year three and (d) 40 per cent. year four.
Awards will be subject to customary provisions for an equity incentive
arrangement of this nature, such as good leaver and bad leaver provisions,
restrictions on transfer and a drag and tag-along right.
Any equity received pursuant to the MIP will be non-voting and will only
become entitled to an equity return once the holders of the non-MIP equity
have received a return equal to the greater of (i) a coupon of eight per cent.
or (ii) a multiple of invested capital equal to 1.2 times, in each case in
relation to the equity value of R&Q at Closing.
Implications of a Carve Out Acquisition on the Rollover and MIP
In the event there is a Carve Out Acquisition in advance of Closing, so as to
preserve the economic benefit of the Rollover and appropriately allocate any
awards under the MIP, it is anticipated that the Managers will receive equity
interests in respect of their Rollover and / or MIP in either R&Q and / or
such separate holding company that acquires the relevant Carve Out Companies,
depending on the entity to which each Manager is assigned. The allocation of
the Rollover and any MIP awards and the valuation ascribed to R&Q and any
Carve Out Companies shall be agreed prior to the closing of any Carve Out
Acquisition.
13. Implementation Agreement
Brickell and R&Q have entered into an Implementation Agreement in relation
to the Acquisition and other related matters. The Implementation Agreement
contains certain undertakings, assurances and confirmations among the parties,
including with respect to the implementation of the Acquisition.
R&Q has agreed that no dividends shall be paid up to completion of the
Acquisition or the earlier termination of the Implementation Agreement.
A detailed summary of the Implementation Agreement is set out in Appendix III,
including a summary of the Conditions to which the Acquisition will be
subject.
14. Description of the Merger
It is intended that the Acquisition will be effected by means of a merger
under the Bermuda Companies Act, involving the merger of BB Sub with and into
R&Q such that R&Q is the surviving company, under Section 104H of the
Bermuda Companies Act. BB Sub will be a Bermuda exempted company incorporated
by and wholly-owned for the purposes of the Merger by Brickell.
The resolutions to approve the Merger must be approved by a majority vote of
75 per cent. of those voting at the General Meeting. The quorum for the
General Meeting is at least two persons, holding or representing by proxy
more than one-third of the issued shares of R&Q.
The anticipated timeline for the Acquisition and New Equity Funding is as
follows:
· Post Circular to approve the Acquisition and New Equity Funding:
around week of April 25(th) 2022
· General Meeting of Shareholders to approve the Acquisition and
New Equity Funding: around week of May 20(th) 2022
· Receipt of $70 million of proceeds from New Equity Funding in
June 2022 and $30 million in August 2022
· Long Stop Date for Completion of the Acquisition: April
2023 (although may be extended in certain circumstances)
15. Related Party Transaction
The entering into the Implementation Agreement and Merger Agreement with
Brickell, a related party by virtue of its 23.2% shareholding in the Company,
constitutes a related party transaction under Rule 13 of the AIM Rules for
Companies. Accordingly, the R&Q Independent Directors, having consulted
with the Company's nominated adviser, Numis, consider that the terms of the
related party transactions are fair and reasonable insofar as Shareholders are
concerned.
16. De-listing of R&Q Shares
Prior to the Closing Date, R&Q will apply to cancel the Admission to
trading on the London Stock Exchange's AIM Market of R&Q's Shares. The
last day of dealings in R&Q Shares on the London Stock Exchange's AIM
Market is expected to be the last Business Day before the Closing Date. In
addition, with effect from the Closing Date, entitlements to R&Q Shares
held within the CREST system will be cancelled.
17. Total Shares in Issue
R&Q confirms that as at the close of business on 31 March 2022, being the
latest practicable date prior to the date of this announcement, it had
275,211,268 R&Q Shares in issue and admitted to trading on the AIM Market
of the London Stock Exchange under ISIN reference BMG7371X1065 and ticker
symbol RQIH.
18. General
It is currently expected that the General Meeting will be held on or around
the week of May 20(th) 2022, and the Acquisition is expected to become
effective around April 2023, subject to receipt of Regulatory Clearances
without delay and to the satisfaction (or waiver) of the other Conditions.
In deciding whether or not to vote, or procure votes in favour, of the
resolutions to be proposed at the General Meeting, R&Q Shareholders should
rely on the information contained, and follow the procedures described, in the
Circular and the form of proxy and form of instruction accompanying the
Circular.
19. Consents
Barclays, Numis and GC Securities have each given and not withdrawn their
consent to the publication of this announcement with the inclusion herein of
the references to their names in the form and context in which they appear.
Brickell has approved the release of this announcement.
Enquiries
Brickell
Tel: +1 305 921 2855
Steven Pasko,
Chairman
Gayle Levy, General
Counsel
R&Q
Tel: +44 (0) 207 780 5850
William
Spiegel
Tom
Solomon
Barclays (Financial Advisor to
R&Q)
Tel: +44 (0)20 7623 2323
Nishant Amin
Milan
Solanki
Numis (Financial Advisor and Nominated Advisor to
R&Q)
Tel: +44 (0)20 7260 1000
Charles Farquhar
Giles Rolls
Stuart
Ord
GC Securities (Financial Advisor to
Brickell)
Tel: +44 (0)20 357 1000
Andrew Beecroft
Ed Hochberg
David Rushworth
FTI Consulting (Financial PR for R&Q)
Tom
Blackwell
Tel: +44 (0)7747 113919
Important Notices
Barclays Bank PLC, acting through its Investment Bank ("Barclays"), which is
authorised by the Prudential Regulation Authority and regulated in the United
Kingdom by the FCA and the Prudential Regulation Authority, is acting
exclusively for R&Q and no one else in connection with the Acquisition and
will not be responsible to anyone other than R&Q for providing the
protections afforded to clients of Barclays nor for providing advice in
relation to the Acquisition or any other matter referred to in this
Announcement.
Numis Securities Limited ("Numis"), which is authorised and regulated in the
United Kingdom by the FCA, is acting exclusively for R&Q and no one else
in connection with the matters set out in this announcement and will not
regard any other person as its client in relation to the matters in this
announcement and will not be responsible to anyone other than R&Q for
providing the protections afforded to clients of Numis, nor for providing
advice in relation to any matter referred to herein.
MMC Securities Limited ("trading as GC Securities, ("GC Securities"), which is
authorised and regulated in the United Kingdom by the FCA, is acting
exclusively for Brickell and no one else in connection with the matters set
out in this announcement and will not regard any other person as its client in
relation to the matters in this announcement and will not be responsible to
anyone other than Brickell for providing the protections afforded to clients
of GC Securities, nor for providing advice in relation to any matter referred
to herein.
The City Code on Takeovers and Mergers
By virtue of its status as a Bermuda incorporated company, the Code does not
apply to R&Q. R&Q has incorporated certain takeover-related provisions
into its Bye-Laws but these do not provide R&Q Shareholders with the full
protections offered by the Code and enforcement of such provisions are the
responsibility of R&Q, not the Panel.
Further Information
This announcement is for information purposes only and is not intended to and
does not constitute, or form any part of, an offer to sell or an invitation to
purchase or subscribe for any securities or the solicitation of any vote or
approval in any jurisdiction pursuant to the Acquisition or otherwise, nor
shall there be any sale, issuance or transfer of securities of R&Q in any
jurisdiction in contravention of applicable law. The Acquisition will be made
solely pursuant to the terms of the Circular, which will contain the full
terms and conditions of the Acquisition, including details of how to vote in
respect of the Acquisition and accompanied by forms of proxy and forms of
instruction for use at the General Meeting. Any decision in respect of, or in
response to, the Acquisition should be made only on the basis of the
information in the Circular. R&Q Shareholders are advised to read the
Circular and any other formal documentation published in relation to the
Acquisition carefully, once it has been published or dispatched.
This announcement has been prepared for the purpose of complying with Bermuda
and English law and the information disclosed may not be the same as that
which would have been disclosed if this announcement had been prepared in
accordance with the laws of jurisdictions outside the United Kingdom and
Bermuda.
This announcement does not constitute a prospectus or prospectus equivalent
document.
Overseas Shareholders
The laws of the relevant jurisdictions may affect the availability of the
Acquisition to persons who are not resident in the United Kingdom, the United
States or Bermuda. Persons who are not resident in the United Kingdom, the
United States or Bermuda or who are subject to laws of any jurisdiction other
than the United Kingdom, the United States or Bermuda, should inform
themselves about, and observe, any applicable requirements. In particular, the
ability of R&Q Shareholders who are not resident in the United Kingdom,
the United States or Bermuda to vote their R&Q Shares with respect to the
Acquisition at the General Meeting may be affected by the laws of the relevant
jurisdiction in which they are located. Any person (including, without
limitation, nominees, trustees and custodians) who would, or otherwise intends
to, forward this announcement, the Circular or any accompanying document to
any jurisdiction outside the United Kingdom, the United States or Bermuda
should refrain from doing so and seek appropriate professional advice before
taking any action.
Notice to US investors
The Acquisition relates to the shares of a Bermuda company and is being made
by means of a merger provided for under the Bermuda Companies Act. The
transaction, implemented by way of a merger is not subject to the tender offer
rules or the proxy solicitation rules under the U.S. Securities Exchange Act
of 1934, as amended. Accordingly, the Acquisition is subject to the disclosure
requirements and practices applicable to a merger involving a target company
in Bermuda quoted on the Alternative Investment Market operated by the London
Stock Exchange, which differ from the disclosure requirements of United States
tender offer and proxy solicitation rules. If, in the future, Brickell
exercises its right to implement the Acquisition by way of a Takeover Offer
and determines to extend the Takeover Offer into the United States, the
Acquisition will be made in compliance with applicable United States laws and
regulations.
Each R&Q Shareholder is urged to consult their independent professional
adviser immediately regarding the tax consequences of the Acquisition
applicable to them, including under applicable United States state and local,
as well as overseas and other, tax laws.
Financial information relating to R&Q included in this announcement and
the Circular has been or shall have been prepared in accordance with
accounting standards applicable in the United Kingdom and may not be
comparable to financial information of US companies or companies whose
financial statements are prepared in accordance with generally accepted
accounting principles in the United States.
R&Q is organised under the laws of a country other than the United States.
Some of the officers and directors of R&Q are residents of countries other
than the United States. In addition, substantial assets of R&Q are located
outside the United States. As a result, it may be difficult for R&Q
Shareholders to effect service of process within the United States upon
R&Q or its officers or directors or to enforce against them a judgment of
a US court predicated upon the federal or state securities laws of the United
States.
Forward-Looking Statements
This announcement contains forward-looking statements, both with respect to
Brickell and R&Q and their industries, that reflect their current views
with respect to future events and financial performance. Statements that are
not historical facts, including statements about Brickell's or R&Q's
beliefs, plans or expectations, are forward-looking statements. These
statements are based on current plans, estimates and expectations, all of
which involve risk and uncertainty. Statements that include the words
"expect," "intend," "plan," "believe," "project," "anticipate," "may", "could"
or "would" or similar statements of a future or forward-looking nature
identify forward-looking statements. Actual results may differ materially from
those included in such forward-looking statements and therefore you should not
place undue reliance on them.
A non-exclusive list of the important factors that could cause actual results
to differ materially from those in such forward-looking statements includes:
(a) changes in the size of claims relating to natural or man-made catastrophe
losses due to the preliminary nature of some reports and estimates of loss and
damage to date; (b) trends in rates for property and casualty insurance and
reinsurance; (c) the timely and full recoverability of reinsurance placed by
Brickell or R&Q with third parties, or other amounts due to Brickell or
R&Q; (d) changes in the projected amount of ceded reinsurance recoverables
and the ratings and credit worthiness of reinsurers; (e) actual loss
experience from insured or reinsured events and the timing of claims payments
being faster or the receipt of reinsurance recoverables being slower than
anticipated; (f) increased competition on the basis of pricing, capacity,
coverage terms or other factors such as the increased inflow of third party
capital into reinsurance markets, which could harm either Brickell's or
R&Q's ability to maintain or increase its business volumes or
profitability; (g) greater frequency or severity of claims and loss activity
than Brickell's or R&Q's respective underwriting, reserving or investment
practices anticipate based on historical experience or industry data; (h)
changes in the global financial markets, including the effects of inflation on
Brickell's or R&Q's business, including on pricing and reserving,
increased government involvement or intervention in the financial services
industry and changes in interest rates, credit spreads, foreign currency
exchange rates and future volatility in the world's credit, financial and
capital markets that adversely affect the performance and valuation of either
Brickell's or R&Q's investments, financing planning and access to such
markets or general financial condition; (i) changes in ratings, rating agency
policies or practices; (j) the potential for changes to methodologies,
estimations and assumptions that underlie the valuation of Brickell's or
R&Q's respective financial instruments that could result in changes to
investment valuations; (k) changes to Brickell's or R&Q's respective
assessment as to whether it is more likely than not that it will be required
to sell, or has the intent to sell, available-for-sale debt securities before
their anticipated recovery; (l) the ability of Brickell's or R&Q's
subsidiaries to pay dividends; (m) the potential effect of legislative or
regulatory developments in the jurisdictions in which Brickell or R&Q
operates, such as those that could impact the financial markets or increase
their respective business costs and required capital levels, including but not
limited to changes in regulatory capital balances that must be maintained by
operating subsidiaries and governmental actions for the purpose of stabilizing
the financial markets; (n) the actual amount of new and renewal business and
acceptance of products and services, including new products and services and
the materialization of risks related to such products and services; (o)
changes in applicable tax laws, tax treaties or tax regulations or the
interpretation or enforcement thereof; (p) the effects of mergers,
acquisitions, divestitures and retrocession.
No Profit Forecasts or Estimates
No statement in this announcement is intended as a profit forecast or estimate
of the future financial performance of R&Q following completion of the
Acquisition for any period unless otherwise stated. Furthermore, no statement
in this announcement should be interpreted to mean that earnings or earnings
per R&Q Share for R&Q for the current or future financial years would
necessarily match or exceed the historical published earnings or earnings per
R&Q Share.
Disclosure Requirements
R&Q is a Bermuda company and is therefore not subject to the Code.
Accordingly, shareholders of R&Q and others dealing in R&Q Shares are
not obliged to disclose any of their dealings under the provisions of the
Code. However, shareholders of R&Q and others dealing in R&Q Shares
are still obliged to comply with disclosure obligations under the Bye-laws,
the AIM Rules and the UK Market Abuse Regulation.
APPENDIX I
SOURCES OF INFORMATION AND BASES OF CALCULATION
In this announcement:
(i) Unless otherwise stated, financial information
concerning R&Q has been extracted from the Annual Report and Accounts of
R&Q for the year ended 31 December 2020.
(ii) The value of the Acquisition is based upon an assumed
275,211,268 R&Q Shares (net of Treasury Shares) in issue on the date of
completion of the Acquisition. The actual number of R&Q Shares in issue on
the date of completion of the Acquisition may vary from the foregoing.
(iii) Unless otherwise stated, all prices for R&Q Shares
are the Closing Price for the relevant date.
The following footnotes are contained throughout this announcement:
(1) Excluding any adjustment for New Equity Funding.
(2) Financial figures are estimates and therefore dependent on finalizing YE
2021 results. Any impairment and/or reserve strengthening is a significant
accounting estimate that involves management making assumptions and
considering future events that are inherently uncertain. There is a risk that
such judgements are not made in accordance with IFRS and thus there may be
material differences once the auditors/actuaries have undertaken their review
as part of the year end audit process which is yet to be completed.
APPENDIX II
IRREVOCABLE UNDERTAKINGS
Directors' Irrevocable Undertakings
Brickell has received irrevocable undertakings to vote, or procure votes, in
favour of the resolutions to approve the Acquisition to be proposed at the
General Meeting (or, in the event that the Acquisition is implemented by way
of a Takeover Offer, to accept or procure acceptance of such offer, or, in the
event that the Acquisition is implemented by way of a Scheme, to vote, or
procure votes, in favour of the resolutions to approve the Acquisition to be
proposed at the Court Meeting and the General Meeting), from the directors of
R&Q, in respect of 9,102,904 R&Q Shares, in aggregate, representing
approximately 3.31 per cent. of the issued share capital of R&Q on 31
March 2022 (being the latest practicable date prior to the date of this
announcement). These undertakings require each member of the R&Q Board to
vote, or procure that the registered holder votes, in favour of the
resolutions to approve the Acquisition which are to be proposed at the General
Meeting (or, in the event the Acquisition is implemented by means of the
Takeover Offer, to accept, the Takeover Offer or, in the event that the
Acquisition is implemented by way of a Scheme, to vote in favour of the
resolutions to approve the Acquisition to be proposed at the Court Meeting and
the General Meeting).
The irrevocable undertakings provided by the directors of R&Q will cease
to be binding if the Acquisition lapses or is withdrawn or if the
Implementation Agreement is terminated and will remain binding if a higher
competing offer is made for R&Q.
The following R&Q Directors have given irrevocable undertakings:
Name Total number of R&Q Shares Percentage of existing issued share capital
William Spiegel 5,413,911 1.97
Alan Quilter 2,078,091 0.76
Thomas Solomon 1,610,902 0.59
Total 9,102,904 3.31
APPENDIX III
THE IMPLEMENTATION AGREEMENT
Brickell and R&Q have entered into an Implementation Agreement in relation
to the Acquisition and other related matters. The Implementation Agreement
contains certain undertakings, assurances and confirmations among the parties,
including with respect to the implementation of the Acquisition.
Under the Implementation Agreement, the Acquisition will be implemented by BB
Sub merging with and into R&Q with R&Q as the surviving company so
that R&Q will become a wholly owned subsidiary of Brickell pursuant to
Section 104H of the Bermuda Companies Act.
1. Conditions to the Acquisition
The Acquisition is conditional on:
· the affirmative vote in favour of the Acquisition by at least 75
per cent of the voting power of shares entitled to vote, at a duly convened
meeting of the R&Q Shareholders at which a quorum is present of two
persons at least holding or representing by proxy more than one-third of the
R&Q Shares;
· the receipt of the Regulatory Clearances as set out in the
Implementation Agreement;
· no relevant authority having entered or issued any order,
judgment, decree or injunction preventing, enjoining, or making illegal the
consummation of the Acquisition (or any of the other anticipated transactions)
and no law having been enacted or being deemed applicable to the Acquisition
(or any of the other anticipated transactions) making the consummation of the
Acquisition or any other anticipated transaction illegal;
· no Material Adverse Change having occurred in relation to the
R&Q Group, taken as a whole and for this purpose a "Material Adverse
Change" or a "MAC" shall mean any event, occurrence, fact, condition or change
that has a material adverse effect on the assets, liabilities, results of
operations or financial condition of the business of R&Q and its
subsidiaries, taken as a whole other than certain limited customary
exclusions;
· none of the Regulatory Clearances imposing or resulting in a
requirement on Brickell to:
o provide capital or a guarantee in respect of any obligations of R&Q or
one of its subsidiaries that is material in the context of the R&Q Group,
taken as a whole;
o sell, divest or dispose of any assets, property or business of Brickell
and its affiliates (including R&Q and its subsidiaries following the
Closing) that are material in the context of: (i) the Brickell Group, taken as
a whole; or (ii) the R&Q Group, taken as a whole; or
o agree to any restriction or requirement in relation to Brickell (or any of
its affiliates) or R&Q (or any of its subsidiaries or associates) which
would have a material adverse effect on the business, financial condition or
results of operations of: (i) the Brickell Group, taken as a whole; and/or
(ii) the R&Q Group, taken as a whole (each, a "Burdensome Condition"); and
· there being no ratings downgrade which is specific to R&Q
(and not the industry in which R&Q and its subsidiaries operate and which
is not predominantly attributable to or as a result of Brickell's involvement
in the Acquisition), which is materially adverse in relation to the business
of the R&Q Group, taken as a whole, and which is not cured by R&Q
within 30 calendar days.
2. Undertakings
Pursuant to the Implementation Agreement, Brickell agrees to use all
reasonable endeavours to obtain the Regulatory Clearances, and R&Q agrees
to use all reasonable endeavours to cooperate with and assist Brickell in
obtaining the Regulatory Clearances, so as to enable the Closing to occur as
soon as practicable and, in any event, prior to the Long Stop Date.
Until Closing occurs or the Implementation Agreement is terminated, R&Q
has agreed to carry on its business in all material respects in the ordinary
course consistent with its past practice and has agreed not to take certain
customary actions without Brickell's consent.
R&Q has also agreed that no dividends shall be paid up to completion of
the Acquisition or the earlier termination of the Implementation Agreement.
3. R&Q non-solicitation undertakings and Brickell matching rights
Pursuant to the Implementation Agreement, R&Q has given various
undertakings, broadly, not to solicit, facilitate, recommend or approve any
offers or proposals by any third parties that might compete, or otherwise be
inconsistent, with the Acquisition, and to promptly notify Brickell of any
unsolicited offers or proposals that may be received. In addition, R&Q has
also agreed that Brickell shall have the right to match any unsolicited
competing offer or proposal that might be presented to the R&Q Directors
or unilaterally announced by any third party.
In the event that, prior to the General Meeting, R&Q receives, in writing,
a bona fide proposal which would or could be reasonably expected to lead to a
superior proposal to the Acquisition (taking into account the existence of the
New Equity Funding in relation to the Acquisition) then in certain
circumstances (including a failure by Brickell to match the superior proposal
as described above) and subject to certain customary provisions, the R&Q
Board may be able to alter their recommendation and proceed to recommend such
alternative proposal.
4. Switch to Takeover Offer or Scheme
The Implementation Agreement also sets out the circumstances in which Brickell
may elect to implement the Acquisition by way of a Takeover Offer or Bermuda
Scheme. Brickell may elect, with the prior written consent of R&Q (not to
be unreasonably withheld, conditioned or delayed), to implement the
Acquisition by way of a Takeover Offer or a Scheme. Any Takeover Offer or
Scheme will be implemented on the same terms, so far as applicable (subject to
appropriate amendments), as those which are set out in the Implementation
Agreement.
5. Termination
The Implementation Agreement may be terminated in the following circumstances:
· upon agreement in writing between Brickell and R&Q, at any
time prior to the completion of the Acquisition;
· by either Brickell or R&Q if the completion of the
Acquisition has not occurred by the Long Stop Date or if the approval of the
R&Q Shareholders is not forthcoming at the General Meeting;
· by Brickell if:
(a) the Acquisition has not been approved by the R&Q Shareholders by
the Long Stop Date;
(b) the Regulatory Clearances have not been received by the Long Stop
Date;
(c) any of the Regulatory Clearances impose, require or result in a
Burdensome Condition;
(d) a MAC has occurred after the date of the Implementation Agreement and
is continuing;
(e) there has been a material breach by R&Q of the Implementation
Agreement or the Purchase and Exchange Agreement;
(f) the R&Q Board withdraw, withhold or modify their recommendation
of the Acquisition or if they recommend a takeover proposal from a competing
offeror;
(g) the Circular has not been posted to R&Q Shareholders within 20
Business Days of the date of the Implementation Agreement (or such later date
as may be agreed between Brickell and R&Q);
(h) the General Meeting has not been held within 40 Business Days of the
date of the Implementation Agreement (or such later date as may be agreed
between Brickell and R&Q); or
(i) R&Q enters into an agreement relating to the implementation of a
takeover proposal from a competing offeror;
· by R&Q if:
(j) there has been a material breach by Brickell of the Implementation
Agreement or the Purchase and Exchange Agreement; or
(k) the R&Q Board authorises R&Q to enter into an agreement
relating to the implementation of a takeover proposal from a competing offeror
which is superior to the Acquisition.
If the Implementation Agreement is terminated by reason of (e) (where a
material breach or material breaches could reasonably be said to have
effectively frustrated Brickell's ability to consummate the Acquisition or any
of the other transactions contemplated in the Implementation Agreement), (f),
(g), (h), (i) or (k) above, R&Q shall pay to Brickell a termination fee of
$12,500,000 (plus any applicable VAT).
If the Implementation Agreement is terminated because (i) completion of the
Acquisition has not occurred by the Long Stop Date or (ii) by reason of (b)
above, in each case in circumstances where: (i) all of the Conditions
(excluding the receipt of Regulatory Clearances) have been satisfied or
waived; and (ii) there has been a material breach by Brickell of its
obligations use all reasonable endeavours to obtain the Regulatory Clearances;
and (iii) with the exception of any Burdensome Condition that could
reasonably be said to have arisen as a result of or be a consequence of a
material breach or a collection of material breaches, on the part of Brickell,
of the Implementation Agreement, no Burdensome Condition has been required or
imposed, then Brickell shall pay to R&Q a termination fee of $12,500,000
(plus any applicable VAT).
6. Carve Out Acquisition
Brickell and R&Q have agreed to cooperate, engage in discussions and use
all reasonable endeavours to enable Brickell, prior to the completion of the
Acquisition, to acquire parts of R&Q's business, including those entities
comprising R&Q's Program Management business, as and when applicable
Regulatory Clearances have been obtained, potentially allowing for an earlier
payment to shareholders.
The Carve Out Companies will be acquired by Brickell prior to completion of
the Merger and all members of the R&Q Group not so acquired will remain as
subsidiaries of R&Q and will become indirect subsidiaries of Brickell
following completion of the Merger on the Closing Date.
On the date of completion of the Carve Out Acquisition:
· Brickell shall pay to R&Q Carve Out Consideration; and
· R&Q shall pay an amount equal to such Carve Out Consideration
to the R&Q Shareholders who hold R&Q Shares (such payment to be by way
of dividend, distribution, return of capital or other mechanism to be agreed
with Brickell pursuant to the terms of any Carve Out Acquisition).
In the event that Closing has not occurred on the Carve Out Acquisition
Payment Date, Brickell shall pay an amount to R&Q sufficient to enable
R&Q to make a payment to the R&Q Shareholders equal to the Acquisition
Consideration less the Carve Out Consideration and regardless of whether
Closing subsequently takes place, the R&Q Shareholders shall not receive
any further payment in respect of the Acquisition or the Merger.
Accordingly, if a Carve Out Acquisition is completed, R&Q Shareholders
shall then become entitled to receive amounts totaling, in aggregate, the
Acquisition Consideration regardless of whether any remaining Conditions
(including the obtaining of any Regulatory Clearances) are satisfied or
waived.
It is not anticipated that the Acquisition, together with any Carve Out
Acquisition, will constitute a 'fundamental change of business' for the
purposes of AIM Rule 15 and, accordingly, R&Q and Brickell do not expect
any Carve Out Acquisition to need to be conditional upon R&Q shareholder
approval. In the event that R&Q Shareholder approval is required pursuant
to AIM Rule 15 (whether for the purpose of the implementation of any Carve Out
Acquisition or otherwise), such shareholder approval will either be sought at
the General Meeting or, if it is not possible to seek such shareholder
approval at the General Meeting (due to timing constraints or the status of
discussions in relation to any Carve Out Acquisition) then such shareholder
approval will be sought at a subsequent special general meeting.
Under the Implementation Agreement, R&Q and Brickell agree to establish
the Joint Steering Committee with the overriding objective of securing the
successful completion of the Carve Out Acquisition.
7. Management Rollover and Management Incentive Plan
Certain senior members of the R&Q management team hold restricted stock
options in the form of issued shares which carry certain contractual
restrictions but which, subject to certain terms and conditions, vest and
become unrestricted over time. As a result of the Acquisition, any such
restricted stock options shall become fully vested and so will be acquired by
Brickell for the Acquisition Consideration pursuant to the Merger, subject to
any deductions under the terms of such restricted stock options.
Management Rollover
The Implementation Agreement sets out the proposed arrangements pursuant to
which 50 per cent. of the after-tax proceeds received by the Managers from the
Acquisition will be subject to the Rollover. The terms of the Rollover are
subject to agreement on documentation but will be on the same economic terms
as applicable to Brickell's post-Closing equity investment in the structure
for Brickell's ownership of R&Q and will include customary terms for an
equity investment of this nature, including as to restrictions on transfer,
leaver provisions (that provide for a sale at fair market value of the
Rollover equity interests) and drag and tag-along rights.
Management Incentive Plan
Brickell has also agreed, pursuant to the terms of the Implementation
Agreement, to implement a MIP upon Closing. The terms of the MIP are subject
to documentation, but it is the intention that under the terms of the MIP, an
aggregate amount equivalent to five per cent. of the post-Closing share
capital of R&Q will be allocated to certain Managers at Closing. Any
equity that has been set aside for allocation under the MIP and that is not
granted at Closing shall be available for future grants to senior management
under the MIP.
Awards pursuant to the MIP will vest in four tranches over a four year period
on a cliff vesting basis as follows: (a) 10 per cent. year one, (b) 20 per
cent. year two, (c) 30 per cent. year three and (d) 40 per cent. year four.
Awards will be subject to customary provisions for an equity incentive
arrangement of this nature, such as good leaver and bad leaver provisions,
restrictions on transfer and a drag and tag-along right.
Any equity received pursuant to the MIP will be non-voting and will only
become entitled to an equity return once the holders of the non-MIP equity
have received a return equal to the greater of (i) a coupon of eight per cent.
or (ii) a multiple of invested capital equal to 1.2 times, in each case in
relation to the equity value of R&Q at Closing.
Implications of a Carve Out Acquisition on the Rollover and MIP
In the event there is a Carve Out Acquisition in advance of Closing which
results in the separation of the Program Management and Legacy Business of
R&Q, so as to preserve the economic benefit of the Rollover and
appropriately allocate any awards under the MIP, it is anticipated that the
Managers will receive equity interests in respect of their Rollover and / or
MIP in either R&Q and / or such separate holding company that acquires the
relevant Carve Out Companies, depending on the entity to which each Manager is
assigned. The allocation of the Rollover and any MIP awards and the valuation
ascribed to R&Q and any Carve Out Companies shall be agreed prior to the
closing of any Carve Out Acquisition.
APPENDIX IV
DEFINITIONS
The following definitions apply throughout this announcement, unless the
context otherwise requires:
"Acquisition"
the acquisition by Brickell, BB Sub Parent or BB Sub of the entire issued
share capital of R&Q, not already owned by Brickell and its affiliates,
for the Acquisition Consideration, to be effected in accordance with the
Implementation Agreement by means of a Bermuda Merger or, in the event that
Brickell elects to proceed with such Acquisition by way of a Takeover Offer or
Scheme, in accordance with the terms of the Implementation Agreement, a
Takeover Offer or acquisition via a Scheme
"Acquisition Consideration" 175 pence in cash
for each R&Q Share, excluding the Excluded Shares
"AIM Market"
the market of that name operated by the London Stock Exchange
"AIM Rules"
the AIM rules for companies published by the London Stock Exchange from time
to time
"Barclays"
Barclays Bank PLC, acting through its investment bank
"BB
Sub"
Brickell PC2 Insurance Holdings Limited which will be incorporated in Bermuda
for purposes of merging with R&Q and which will be a Bermuda exempted
company
"Bermuda Merger Agreement" the agreement effecting the
merger of BB Sub and R&Q pursuant to Section 104H of the Bermuda Companies
Act to be entered into among Brickell, BB Sub and R&Q
"Brickell"
Brickell PC Insurance Holdings LLC
"Brickell
Directors" the
directors of Brickell from time to time
"Brickell
Group"
Brickell and its subsidiaries and subsidiary undertakings from time to time
"Burdensome Condition" has the
meaning given in Section 1 of Appendix III of this announcement
"Business
Day"
a day (other than Saturday, Sunday or a public holiday) on which banks in the
City of London are open for business generally
"Bye-Laws"
the bye-laws of R&Q (as amended from time to time)
"Carve Out Acquisition" has
the meaning given in paragraph 8 of this announcement
"Carve Out Acquisition has
the meaning given in paragraph 8 of this announcement
Payment Date"
"Carve Out Companies" has the
meaning given in paragraph 8 of this announcement
"Carve Out Consideration" has the meaning
given in paragraph 8 of this announcement
"Circular"
the circular to be issued by R&Q to R&Q Shareholders setting out the
terms and conditions of the Acquisition and the notice of the General Meeting
"Closing"
the closing of the Merger
"Closing
Date"
the date on which Closing occurs
"Closing
Price"
the closing middle market price of a R&Q Share on a particular trading day
"Code"
the City Code on Takeovers and Mergers (including the General Principles
therein and the Appendices)
"Conditions"
the conditions to the completion of the Acquisition set out in Section 1 of
Appendix III of this announcement
"Confidentiality Agreement" the non-disclosure
undertaking entered into by the parties on 16 April 2021
"Court"
the Supreme Court of Bermuda
"CREST"
the relevant system (as defined in the Uncertificated Securities Regulations
2001 (SI 2001/3755)) in respect of which Euroclear U.K. & Ireland Limited
is the Operator (as defined in the Regulations)
"Disclosure and Transparency Rules" the disclosure and transparency rules made
by the FCA and forming part of the FCA's handbook on rules and guidance, as
amended from time to time
"Exchange
Price"
a value equal to £1.15
"Excluded
Shares"
any R&Q Shares legally or beneficially held by Brickell or any of its
affiliates and any Treasury Shares
"FCA" or "Financial
Conduct
Authority" the
U.K. Financial Conduct Authority or its successor from time to time
"FSMA"
Financial Services and Markets Act 2000 (as amended from time to time)
"General
Meeting"
the special general meeting of R&Q to be convened in order for R&Q
Shareholders to consider, and if thought fit approve, certain matters in
connection with the Acquisition, notice of which is to be set out in the
Circular (including, where the context requires, any adjournment, postponement
or reconvention thereof)
"Implementation Agreement" the agreement among
Brickell and R&Q dated 1 April 2022, in relation to the implementation of
the Acquisition
"Independent Directors"
Alastair Campbell, Philip Barnes, Eamonn Flanagan and Jo Fox being those
R&Q Directors who are not being offered the opportunity to participate in
equity interests of R&Q following Closing
"ISIN"
International Securities Identification Number
"London Stock Exchange" London Stock
Exchange plc
"Long Stop
Date"
(a) (where Brickell elects to undertake a Carve Out Acquisition) the date that
is 24 months following the date of the Implementation Agreement or such later
date as Brickell may determine; or
(b) (otherwise) the date that is 12 months following the date of the
Implementation Agreement, or such later date as Brickell and R&Q may agree
in writing, provided that if: (a) all Conditions have been satisfied other
than the Condition relating to Regulatory Clearances; and (b) Brickell is
complying in all material respects with its obligations to use all reasonable
endeavours to obtain the Regulatory Clearances, either R&Q or Brickell
shall be entitled, by service of written notice on the other, to require: (i)
an automatic 2 month extension such that the "Long Stop Date" shall be the
date that is 14 months following the execution of the Implementation Agreement
(a "first extension request"); and (ii) provided a first extension request has
been made (by either party), a further automatic 2 month extension such that
the "Long Stop Date" shall be the date that is 16 months following the
execution of the Implementation Agreement
"MAC" or "Material Adverse
Change"
has the meaning given in Section 1 of Appendix III of this announcement
"Merger"
the merger of BB Sub with and into R&Q with R&Q as the surviving
company so that R&Q will become a wholly owned subsidiary of Brickell
pursuant to Section 104H of the Bermuda Companies Act
"New Equity Funding" the
US$100 million to be invested, pursuant to the Purchase and Exchange
Agreement, in newly issued exchangeable preferred securities of R&Q PS
Holdings Inc, a subsidiary of R&Q
"Preferred
Stock"
has the meaning given in paragraph 6 of this announcement
"Program
Business" the
group of businesses comprising the Accredited entities, the Vibe Lloyd's
business and the Tradesman business
"Purchase and Exchange Agreement" the agreement dated 1 April 2022 with regard
to the purchase by Brickell of a number of shares of Preferred Stock to be
newly issued by R&Q PS Holdings, Inc, a R&Q subsidiary
"R&Q"
Randall & Quilter Investment Holdings Ltd, Clarendon House, 2 Church
Street, Hamilton HM11, Bermuda
"R&Q
Board"
the Board of Directors of R&Q
"R&Q Depositary Interests" the
dematerialised depositary interests issued in CREST in respect of R&Q
Shares
"R&Q
Directors"
the directors of R&Q from time to time and "R&Q Director" means any
one of them
"R&Q
Group"
R&Q and its subsidiaries and subsidiary undertakings from time to time
"R&Q
Shareholders"
holders of R&Q Shares
"R&Q
Shares"
the common shares of par value 2 pence each in the capital of R&Q,
including the R&Q Depositary Interests in respect of such shares (other
than any such shares that may be Treasury Shares while held by R&Q)
"Regulatory Clearances" the
consents of, or declarations, notifications, or filings with, and the other
terminations or expirations of waiting periods required from, the Relevant
Authorities, as set forth in the Implementation Agreement, having been filed,
having occurred, or having been obtained and, if applicable, being in full
force and effect
"Relevant
Authority" any
court, tribunal, government or governmental, quasi-governmental,
supranational, statutory, regulatory, self-regulatory, environmental or
investigative body, person, court, trade or regulatory agency, authority,
association or institution or any competition, antitrust or supervisory body,
in each case in any jurisdiction
"Scheme"
if Brickell elects to implement the Acquisition by way of a scheme (pursuant
to the Bermuda Companies Act) the scheme of arrangement under Section 99 of
the Bermuda Companies Act to be proposed by R&Q to R&Q Shareholders in
order to implement the Acquisition
"subsidiary undertaking",
"associated undertaking"
and
"undertaking"
shall have the meanings given by the (United Kingdom) Companies Act of 2006
(including the schedules thereto), as amended
"Takeover
Offer"
if Brickell elects to implement the Acquisition by way of a takeover offer
(pursuant to the Bermuda Companies Act) in accordance with and subject to the
Implementation Agreement, the offer to be made by Brickell or BB Sub to
acquire the entire issued share capital of R&Q
"Treasury
Shares"
any R&Q Shares which are for the time being held by R&Q as treasury
shares (within the meaning of the Bermuda Companies Act)
"U.K." or "United Kingdom" the United Kingdom
of Great Britain and Northern Ireland
"UK Market Abuse Regulation" the Market Abuse Regulation
(Regulation 596/2014) as it forms part of the laws of the UK by virtue of the
European Union (Withdrawal) Act 2018 (as amended)
"U.S." or "United States"
or "United States of America" the United States
of America, its possessions and territories, all areas subject to its
jurisdiction or any subdivision thereof, any State of the United States and
the District of Columbia
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. END ACQIBMJTMTJMMLTRecent news on R&Q Insurance Holdings
See all newsREG - R&Q Insurance Hldgs - Update on proposed sale of Accredited
AnnouncementREG - R&Q Insurance Hldgs - Appointment of Non-Executive Directors
AnnouncementREG - R&Q Insurance Hldgs - Update on Trading and Sale of Accredited
AnnouncementREG - R&Q Insurance Hldgs - TR-1: Notification of major holdings
AnnouncementREG - R&Q Insurance Hldgs - Comment on recent press speculation
Announcement