This press release does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the notes, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
The Ardonagh Group (“the Group”) today announces the launch of an offering of its $500 million senior PIK toggle notes due 2026 (the “Notes”). The proceeds of the Notes, together with drawings under a new senior secured term loan facility of £1,575 million (equivalent), will be used
(i) to redeem the Group’s £553,300,000 8.375% senior secured notes due 2023, USD $520,000,000 8.625% senior secured notes due 2023 and USD $235,000,000 8.625% senior secured notes due 2023 (the “Existing Notes Redemption”);
(ii) to repay drawn amounts under the existing revolving credit facility agreement;
(iii) to fund the acquisitions of Nevada 4 Midco 1 Limited (holding company of Bravo Investments Holdings Limited) and Nevada 5 Topco Limited (holding company of Arachas Topco Limited) from funds managed by HPS Investment Partners (“HPS”), LLC and Madison Dearborn Partners (“MDP”), LLC, and to fund the acquisition of Bennetts Motorcycling Services Ltd;
(iv) to pay the fees and expenses incurred in connection with the foregoing transactions, including fees and expenses incurred in connection with the Offering, repayment of existing debt of the targets, costs related to the acquisitions and redemption costs including accrued interest incurred in connection with the Existing Notes Redemption; and
(v) for general corporate purposes.
The Group also announces today certain information provided in Appendix A hereto.
Regulatory Notice: see attached for a full copy of the press release issued by The Ardonagh Group
Appendix A: Information Release
David Ross, Chief Executive of Ardonagh, commented:
“Today’s announcements represent an important step in the continued development of Ardonagh’s multi-product and multi-channel platform through sustained focus on organic growth and selective acquisition strategy, as we continue in our ambition to excel as the largest independent insurance broker in the United Kingdom and amongst the largest globally.
Bravo and Arachas are two strong, resilient businesses which are highly complementary to the Ardonagh platform and will allow us to further increase our diversification across products, channels, carriers, income producers. Our highly diversified business has enabled us to remain resilient as we navigate the recent challenges presented by the Covid-19 pandemic.”
The Group today announces entry into share purchase agreements to acquire the entire share capital of Nevada 4 Midco 1 Limited (holding company of Bravo Investments Holdings Limited) and Nevada 5 Topco Limited (holding company of Arachas Topco Limited) from funds managed by HPS Investment Partners, LLC and Madison Dearborn Partners, LLC and the funding of such acquisitions with the proceeds of a proposed debt financing. The acquisitions are subject to customary closing conditions.
Including the acquisitions of Arachas, Bravo and Bennetts1, on a pro forma basis, the Group would have generated Total Pro Forma Income of £814.2 million and Total Pro Forma Adjusted EBITDA of £275.5 million, in each case for the twelve months ended 31 March 2020.
The Arachas Acquisition
Arachas is the largest SME-focused commercial insurance broker in Ireland, with specialized offerings and a nationwide reach that has allowed the business to quickly gain a leading position in its core markets. With 139,000 policies under management as of 31 December 2019, Arachas is the Republic of Ireland’s largest commercial insurance broker. Arachas specializes in corporate, SME and affinity scheme insurance products as well as providing a high net worth-focused private client service. Arachas delivers exclusive insurance solutions through a multi-channel distribution strategy which comprises a retail footprint of six offices and wholesale footprint of approximately 400 third-party brokers across the Republic of Ireland. Within the Group, Arachas will provide an incremental set of product capabilities and carrier relationships for the broader platform to leverage while further enhancing the Group’s leading position, particularly among small and medium enterprise (“SME”) customers.
The Bravo Acquisition
Bravo consists of two highly complementary segments which operate under three brands: Broker Network, Compass and Ethos Broking.
For the twelve months ended 31 March 2020, Bravo placed approximately £2.6 billion of GWP, both directly through Ethos and indirectly through its networks.
2. Other Relevant Transactions
The Group will enter into a credit facility agreement on or prior to the issue date of the Notes in respect of a senior secured term loan facility of £1,575 million (equivalent) (the “Term Facility”), a senior secured committed capital expenditures multi-currency term loan facility in a principal amount of £300 million (equivalent) (the “Committed Capital Expenditures Facility”) and a £171.5 million (equivalent) super senior revolving credit facility (the “Revolving Credit Facility”). The Group intends to use proceeds from the Committed Capital Expenditures Facility for potential acquisitions and other investments in the future.
The Term Facility and the Committed Capital Expenditures Facility have been provided by direct lending funds managed by Ares Management Corporation, Caisse de dépôt et placement du Québec (“CDPQ”), HPS, KKR, Oaktree Capital Management, L.P, Owl Rock Capital and certain other institutional lenders. The Revolving Credit Facility will be provided by a club of large, international banks, the majority of which are current lenders to the Group.
Certain equity schemes, including incentive share schemes, are being reorganized into a new class of common equity shares at a valuation of £2.10 per share, which equates to a total equity valuation for Topco of approximately £1.6 billion based on 744 million currently issued shares. HPS and MDP will continue to retain their majority shareholding in the Group.
Ardonagh is being advised by Fenchurch Advisory Partners.