05 June 2017

CF to buy Fidelity & Guaranty Life

Blank check company CF is acquiring Fidelity & Guaranty Life (FGL) for about USD 1,835 million, which includes the assumption of debt worth USD 405 million. According to Zephyr, the M&A database published by Bureau van Dijk, the takeover is set to become the second-largest acquisition of a pension products provider to date. This comes after the FGL pulled out of its planned merger with Chinese insurer Anbang almost two months ago following US state regulators’ refusal to approve the USD 1,573 million deal.

CF is paying USD 31.10 per share, representing a 7.7 per cent premium to Fidelity’s close on 23rd May, the last trading day prior to the bid being announced. As part of the deal, the target’s majority shareholder HRG is concurrently offloading its Cayman Islands and Bermuda incorporated reinsurance businesses, which are collectively named Front Street Re, via a transaction valued at USD 65 million.

Incorporated in the Cayman Islands, CF is a permanent capital vehicle led by Fidelity National Financial’s chairman William P Foley II and former Blackstone senior managing director Chinh E Chu. The entity raised USD 600 million from its initial public offering on Nasdaq last July and will use the proceeds to fund its acquisition of FGL. In addition, Blackstone, GSO Capital Partners and Fidelity National Financial are financing the transaction by subscribing for USD 900 million worth of new common and preferred shares in CF.

Founded in 1959, FGL specialises in pension and life insurance products and currently has over 700,000 policyholders. According to its press release, the company’s total assets are valued at about USD 28,000 million, based on Generally Accepted Accounting Principles, with their adjusted book value being around USD 1,600 million.

FGL’s business, however, has been on a decline since it listed on the New York Stock Exchange in December 2013. Its revenue fell 15.0 per cent to USD 1,139 million in the 12 months ended 30th September 2016 from USD 1,347 million during the same timeframe almost four years ago. Similarly, it yielded net profit of only USD 97 million last year, compared to USD 348 million in 2013.  

Although FGL’s board has given the go-ahead, the transaction remains subject to shareholder approvals before closing, which is scheduled to take place by the end of this year.

Commenting on the transaction, Chu said: “We look forward to working with management to continue to build a premier insurance platform and accelerate value creation for shareholders.” He added: “CF is an ideal platform for FGL given our permanent capital and blue chip long-term investor base.”

© Zephyr