Chiamaka Ajeamo, [email protected]
With three months left to complete the first phase of the insurance industry recapitalisation exercise slated for December 31 2020, operators are leaving no stones unturned to ensure they meet at least half of the capital requirements stipulated by the National Insurance Commission (NAICOM).
The final deadline for insurance companies to fully recapitalise is September 2021, according to the NAICOM. However, it seems some insurers may not wait till next year to complete their recapitalisation plan, judging from the swift response they have gotten from their investors and shareholders.
One of such companies is Law Union and Rock Insurance Plc. To this end, its shareholders have accepted an offer of N1.23 per share for every 50 kobo ordinary share held from the new owner, Verod Capital Management.
The Board of the company secured the exit payment from its new investor in the quest to get full value for the investment of shareholders of the company.
Basically, the offer was secured from Verod Capital to purchase the entire issued share capital of the company to which the company signed a Transaction Implementation Agreement (TIA) with Verod, through its investment vehicle; Kanuri LUR Limited, which sets out the broad framework for the acquisition of the entire issued capital of the company by Kanuri LUR.
The agreement for the exit payment was reached by the Board and shareholders at Law Union and Rock Insurance 51st Annual General Meeting and court-ordered meeting held on Thursday, September 10, 2020 in Lagos, where the Scheme of Arrangement for the proposed acquisition of the company was discussed.
The development is due to the mandatory regulation of the National Insurance Commission (NAICOM) increasing the minimum paid-up share capital of all insurance and reinsurance companies with a deadline of June 30. Based on this, the minimum paid-up capital of Law Union and Rock was increased from N3 billion to N10 billion.
However, the proposed transaction as contained in the TIA is expected to involve the transfer of 4,296,330,500 ordinary shares of 50 kobo each of Law Union held by the scheme shareholders to Kanuri LUR or any other nominee of Kanuri LUR in consideration for a cash payment of N1.23 per share to the scheme shareholders, following which all the shares in the company will become fully held by Kanuri LUR and its designated nominee.
Subsequently and upon the Scheme becoming effective, Law Union will be delisted from the Main Board of the Nigerian Stock Exchange (NSE), the registration of the ordinary shares of the company with the Securities and Exchange Commission (SEC) will be withdrawn and the company will be re-registered as a private company limited by shares.
The Chairman, Law Union and Rock Insurance, Mr Remi Babalola, speaking during the court-ordered meeting which followed the AGM, said that the company initially explored merger discussions with other insurance companies and communicated initial recapitalisation plan to NAICOM.
Babalola, however, noted that they found that the shareholders of Law Union would not maximise shareholder value if such merger discussions crystallised, which led them to seek more optimal avenues for shareholders to get better value for their investments in the company, through acquisition by Verod, using the Kanuri LUR SPV.
“Following negotiations with Kanuri LUR and further to advice from its advisers, the board resolved to recommend the proposal to the shareholders for their kind consideration at a meeting to be convened by an order of the Federal High Court.
“The board has further resolved to effect the proposal by way of a Scheme of Arrangement under Section 539 of the Companies and Allied Matters Act (CAMA), chapter C20, laws of the federation of Nigeria 2004 as your board believes that same will serve the best interests of both the company and its shareholders,” Babalola said.
The chairman further stated that Kanuri LUR’s proposal formally stated its intention to acquire Law Union resulting in the company being re-registered as a private company, noting that the proposal will be implemented through Kanuri LUR and its designated nominee, who will receive all the shares under the scheme upon the scheme taking effect.
“According to the proposed scheme consideration, the offer represents a total value of N1.23 per share, a 129 per cent of the last traded share price of the company on February 27, 2020 at N0.95 per share, being the last business day prior to the date the execution of the TIA and announcement on the Exchange, and a 208 per cent of the 60 – traded day weighted average share price of N0.59 per share as at February 27, 2020,” he added.
On its part, the shareholder groups commended the board and management of the company on its performance and growth, which made it attractive to investors.
They also stated that the choice taken would also be beneficial to the staff of the company, as there won’t be mass retrenchment.
Its Managing Director, Mr Ademayowa Adeduro, on his part said historically, the company has performed excellently especially since its acquisition by the consortium of investors (Alternative Capital Partners and Swanlux Solutions and Services Limited in 2012), who embarked on a transformation and restructuring that has enabled the company align its offerings to the unique needs of the various sectors of the economy.
Adeduro pointed out that this led to the turn-around of the company from a loss-of Nl.3 billion in 2012 to profitability of N250 million in the following year and this has grown to N860 million in 2019.
“The shareholders’ fund has also significantly improved over the same period growing from N3.5 billion in 2012 to N7.2 billion in 2019. With respect to the financial performance for 2019, gross premium written rose by 6 per cent from N4.54 billion achieved in 2018 to N4.83 billion.
“The net benefit and claims declined astronomically by 20 per cent, to Nl.28 billion from Nl.6 billion posted in 2018. Underwriting profit increased significantly by 54 per cent, to N0.98 billion from N0.64 billion posted in the preceding year.
“Based on the decline in net benefits and claims and significant increase in underwriting profit, the company’s profit before tax increased significantly by 91 per cent to N0.94 billion from N0.5 billion recorded in 2018.
“Finally, with the success of the AGM and court-ordered meeting, it is simply a matter of weeks for Law Union to complete its recapitalization scheme”, Ade duro said.