Sat | Dec 14, 2019

Sagicor Financial stock suspended to fast-track Alignvest deal

Published:Friday | November 29, 2019 | 12:27 AMSteven Jackson - Senior Business Reporter

Dodridge Miller, CEO of Sagicor Financial Corporation.
Dodridge Miller, CEO of Sagicor Financial Corporation.

Shares in Sagicor Financial Corporation, SFC, were suspended in three markets this week to fast-track two deals and the insurance company’s shares trading on the Toronto Stock Exchange, TSX.

Small shareholders in SFC will get their holdings exchanged for shares in Alignvest Acquisition II, a blank-cheque company on the TSX that will become the vehicle for Sagicor Financial’s listing. That deal closes by December 6, according SFC’s filings on the London Stock Exchange, LSE. SFC also trades in Barbados and Trinidad.

Concurrently, ‘additional subscription agreements’ would allow regional financial provider JMMB Group and North American investment funds to buy chunks of Alignvest II shares.

Assuming a stable Canadian dollar, the JMMB subscription is expected to represent around US$250 million or 22 per cent of all new Sagicor common shares issued and outstanding immediately following the closing of the transaction.

“The transaction and the JMMB subscription are expected to be completed in fourth quarter 2019. There can be no assurance that the transaction or the JMMB subscription will be completed,” stated Alignvest in a November 26 filing.

JMMB Group referred to requests for comment on the precise details of how it acquire the new Sagicor shares back to Sagicor Financial and Alignvest, none of which had responded up to press time.

Alignvest Acquisition was listed as a blank-cheque company in 2017. It is controlled by Alignvest Management Corporation, described as an alternative investment management firm whose board members include high net worth Canadians.

The regional insurer will be renamed Sagicor Financial Company at its listing in Canada.

Alignvest, through its Alignvest Partners Master Fund, will pump in US$50 million for a stake in new Sagicor. The transaction will also see a group of investors pump in US$120 million, including Vora Capital, Mehdi Khimji, Beachhead Credit Opportunities and Beachhead Special Opportunities. KGT Investments, which was previously linked to the deal, has pulled out and was “replaced”, according to the Alignvest filing.

At the close of both deals, Alignvest expects to hold US$420 million in cash or nearly twice the cash it expected to keep from structuring the deal. That’s because less than 10 per cent of minority shareholders agreed to sell their shares for cash.

In mid-June, Alignvest announced that out of a maximum of US$205 million available, shareholders of Sagicor only elected for about US$20 million as cash consideration, “meaning that the vast majority of Sagicor’s shareholders will be receiving solely share consideration and retaining their full investment in the business,” the Canadian company said.

“As a result, following completion of the transaction, it is expected that the corporation will retain over US$420 million of cash before expenses from its non-redeemed initial public offering proceeds, as well as its forward placement proceeds and the Alignvest Committed Subscriptions.”

The reluctance to sell was due in part to the increased trading multiples that investors expect with the listing on a more active Canadian exchange.

Alignvest said it “believes” that Sagicor trades at an unwarranted discount to its Canadian and Caribbean peers in large part due to Sagicor’s disaggregated shareholder base and muted price discovery on its current stock exchanges.

It added that Alignvest and Sagicor expect that the discount at which SFC traded on the Barbados and Trinidad stock exchanges, compared to Canadian peers, “should be reduced or eliminated over time” as a result of new Sagicor’s listing on the TSX.

“The scheme is scheduled to be completed on or before December 6, 2019, the date of such completion, or the effective date. Legal transfer of all shares of Sagicor held by shareholders will occur on and as of the effective date,” stated the Sagicor notice sent to the LSE.

The block trade of all shares will occur on or before December 6 for the Barbados Stock Exchange and December 17 for the Trinidad Stock Exchange. The LSE indicated that it would cancel shares on November 28.