October 18, 2017 — Assurant Inc. announced this morning it is acquiring The Warranty Group from TPG Capital in an enterprise deal valued at $2.5 billion. Assurant’s (NYSE: AIZ) share price jumped more than $6 to $101 on the news.
With a $1.9 billion equity valuation for The Warranty Group — $2.5 billion with its debt — the transaction provides a nice three-year return for TPG which acquired the company from private equity firm Onex for $1.5 billion in August 2014.
The two competitors, which offer insurance and service-related products for homes, consumer electronics, appliances and automobiles, will combine operations once the acquisition closes sometime in the first half of 2015. Adding Warranty Group will expand Assurant’s global operations from 19 to 35 countries, and should generate $60 million in cost savings in 2019.
Assurant, Inc. will become a wholly-owned subsidiary of TWG Holdings Limited with Assurant shareholders owning approximately 77% of the new company, which will be named Assurant Ltd. TPG will own the other 23% — or $1.5 billion of the new company based on Wednesday’s share price closing. As part of the deal, Assurant will pay $372 million in cash to TPG.
Upon closing, Assurant Ltd. shares will trade on the New York Stock Exchange retaining the stock symbol AIZ. The senior management team of Assurant led by current President and CEO Alan Colberg will lead the combined organization. Warranty Group CEO and President Nelson Chai along with Eric Leathers, Partner at TPG Capital and Peter McGoohan, Principal at TPG Capital will join the 12-member Assurant board.
According to the press release, Assurant intends to finance the cash consideration and repayment of approximately $591 million of The Warranty Group’s existing debt through new debt, and preferred securities expected to be issued after closing. Assurant has entered into a commitment letter for a $1.0 billion bridge facility.
For more analysis of this year’s vendor acquisitions click on the report below (available to premium subscribers of The Banks Report).