6th Nov 2007 07:01
Tawa PLC06 November 2007 Regulatory AIM Press releaseFor Immediate release6 November 2007 Tawa plc Acquisition of PXRE Reinsurance Company and Placing Tawa plc ("Tawa" or "the Company") the UK-quoted non life run-off consolidator,announces that it has entered into a stock purchase agreement with Argo GroupInternational Holdings, Ltd ("Argo Group") (Nasdaq GS: AGII) to acquire itsConnecticut, USA, subsidiary, PXRE Reinsurance Company ("PXRE") for an estimatedcash consideration of US$114m. The total consideration may be reduced by anypre-close dividend paid to Argo Group and is subject to adjustment following thecalculation of the closing net asset value. The acquisition would give Tawa its first operation in the US, the largestrun-off market in the world and is in accordance with Tawa's statedconsolidation strategy set out at the time of its admission to AIM in July 2007. PXRE primarily wrote reinsurance of property, marine and aerospace risks with afocus on catastrophe related coverage. Its operations were put into run-off inFebruary 2006 following the downgrading by analysts of the parent of PXRE in2005 as a result of the 2005 hurricanes in the Gulf. As at 30 June 2007 PXRE's undiscounted pro forma net assets were US$144m and areestimated at US$148m on a discounted basis after making adjustments, inter alia,for future investment income and future claims handling costs. Subject to regulatory approval from the Connecticut Department of Insurance andcertain pre-closing transfers and adjustments, the acquisition is expected tocomplete before the end of the first quarter of 2008. It is intended that the acquisition cost will be financed half through aproposed placing of new Tawa shares with the balance coming from borrowings andexisting cash resources. This would require an estimated US$58m (c.£28m) (notincluding the expenses of the placing) to be raised through a placing of newshares in Tawa. Tawa issued its Interim Report on 25 September 2007. At 30 June 2007 its netassets were US$186m, which was increased by US$50m following its listing on AIM,to a pro forma total of US$236m. Pro forma net assets at that date including theacquisition of PXRE as described above would have been US$317m on the basis thatno pre-close dividend is paid and the acquisition is financed half in equity. Gilles Erulin, Chief Executive Officer of Tawa, commenting on the acquisitionstated: "PXRE is an important acquisition for Tawa, it fits the profile of our targetportfolio very well and it demonstrates that Tawa can seize growth opportunityin non-European markets. We are confident that our ability to provide a liquidexit route for owners of run-off operations, places us well to effect furthervalue enhancing acquisitions." Enquiries: Gilles Erulin, Chief Executive Tawa plc 020 7204 8000 David Haggie, Peter Rigby or Zoe Pocock 020 7417 8989 Haggie Financial James Britton, Guy Wiehahn or Gordon Suggett 020 7418 8900 KBC Peel Hunt (nominated adviser and broker) Acquisition agreement The agreement is subject to certain conditions including receipt of regulatoryapprovals, completion of certain pre-closing transfers and adjustments, thecommutation of certain intra-group reinsurance agreements between PXRE and theArgo Group and no material breach of warranty prior to completion. Both Argo andTawa have a right under certain circumstances not to complete the acquisitionsubject to payment of a break fee of a maximum amount of US$5 million. Tawa hasthe benefit of certain warranties and indemnities, including in relation to tax,subject to limitations in respect of time and quantum. The agreement is governedby New York law. The placing It is anticipated that KBC Peel Hunt, Tawa's nominated adviser and broker, willplace sufficient new Tawa shares with institutional investors to raise thenecessary equity capital in the period before completion. Financiere Pinault, Tawa's majority shareholder, has stated that it confirmsthat, to the extent that the acquisition is financed by issuing new shares, andto the degree that other investors are not found, Financiere Pinault willsubscribe for the remaining shares up to a maximum aggregate value of US$70mprovided that the price per share does not exceed 150p. Financiere Pinault hasagreed to do this for no consideration. Based on an assumed placing to raise US$60m (including the expenses of theplacing), the closing mid market price of 135.5 p of a Tawa share on 2 November2007 and a US$:£ rate of 2.0819, approximately 21.25 million new shares (21% ofthe current issued share capital) would be issued. The actual number of sharesto be issued will depend on the actual subscription price. On the basis of theseassumptions and that Financiere Pinault does not subscribe and is not requiredto subscribe, its shareholding will fall from 79% to 65% of Tawa's issued sharecapital. If, however, it did subscribe at a price of 150p per share itsshareholding would increase to 82% of Tawa's issued share capital. The subscription confirmation provided by Financiere Pinault is deemed to be arelated party transaction in terms of the AIM Rules. If an actual transaction isentered into between Tawa and Financiere Pinault with agreed terms andconditions, the Directors (save for Patricia Barbizet, Gilles Pagniez and LoicBrivezac) will consider, having consulted KBC Peel Hunt Ltd, whether the termsof the commitment are fair and reasonable insofar as Tawa's shareholders areconcerned and if so will approve Financiere Pinault's potential subscription foradditional Tawa shares pursuant to their commitment. Extraordinary General Meeting The Company will be sending out a circular to shareholders convening anExtraordinary General Meeting asking them to vote in favour of a resolution todisapply statutory pre-emption rights in relation to the issue of new ordinaryshares which will provide a margin over that required to finance thetransaction. The authority will expire at the 2008 annual general meeting of theCompany. Current Trading The main operating segment of Tawa's business, insurance run-off is performingbroadly as expected but, as in previous years, the results from commutationactivity in the fourth quarter will have a material bearing on the outcome for2007. Notes to Editors: About Tawa Tawa plc was formed in 2001 with the purpose of acquiring and managing therun-off, portfolios of non-life insurance and reinsurance companies. It alsoprovides run-off related services through a dedicated subsidiary, TawaManagement. As a consolidator of the non-life run-off market, Tawa's strategy is to acquirecompanies and portfolios in run-off in the UK, US, continental Europe, Bermuda,Australia and elsewhere as opportunities arise. By creating a diversified portfolio of run-off businesses at different stages ofthe run-off process Tawa will gain economies of scale whilst also enhancing andstabilising earnings. Since its formation, Tawa has acquired CX Reinsurance Company Limited (CX RE)and KX Reinsurance Company limited (KX RE) and is managing the run-off of thesebusinesses. In July 2007 Tawa plc was floated on the AIM market. Further information can be found on the Company's website:www.tawaplc.com ABOUT ARGO GROUP Headquartered in Bermuda, Argo Group International Holdings, Ltd. (Nasdaq GS:AGII) is an international underwriter of specialty insurance and reinsuranceproducts in the property and casualty market. Argo Group offers a full line ofhigh-quality products and services designed to meet the unique coverage andclaims handling needs of businesses in three primary segments: Excess andSurplus Lines, Select Markets, and International Specialty. Information on ArgoGroup and its subsidiaries is available at www.argolimited.com. Legal Notice: The release, publication or distribution of this announcement in certainjurisdictions may be restricted by law and therefore persons in suchjurisdictions into which this announcement is released, published or distributedshould inform themselves about and observe such restrictions. No offer, invitation or inducement to acquire shares in Tawa plc ("Tawa" or the"Company") or any other company is made by this announcement. This announcementis not an invitation nor is it intended to be an inducement to engage ininvestment activity for the purposes of section 21 of the Financial Services andMarkets Act 2000. This announcement includes certain forward-looking statements, which can beidentified by the use of forward-looking terminology, including the terms"believes", "estimates", "anticipates", "projects", "expects", "intends", "may","will", "seeks" or "should" or, in each case, their negative or other variationsor comparable terminology, or by discussions of strategy, plans, objectives,goals, future events or intentions. These forward-looking statements relate tomatters that are not historical facts and include statements regarding theCompany and its subsidiaries (together the "Group") and its directors' currentintentions, beliefs or expectations concerning, amongst other things, theGroup's results of operations, financial condition, liquidity, prospects,growth, strategies and the industry in which the Group operates. Forward-lookingstatements are not an assurance of future performance. All forward-lookingstatements in this announcement rely on a number of assumptions concerningfuture events and are subject to known and unknown risks and a number ofuncertainties and other factors that may or may not occur in the future, many ofwhich are outside the Company's control that could cause actual results todiffer materially from such statements.. Other than in accordance with theCompany's obligations under the AIM Rules, the Company undertakes no obligationto update or revise publicly any forward-looking statements, whether as a resultof new information, future events or otherwise. In addition, any reference inthis announcement to the price at which the Company's ordinary shares have beenbought or sold in the past or the yield on ordinary shares cannot be relied onas a guide to future performance. Your attention is drawn to Part III andparagraph 3 of Part VI of the Company's AIM Admission Document which isavailable on the Company's website. These respectively contain a non-exclusivelist of risk factors to which the Company is subject and a summary of US lawsand regulations. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
ACH.L