Inter-Atlantic Financial, Inc. (stock symbol: [t]IAN[/t]), which raised $68.9 million when it completed its IPO in October 2007, has announced that it has signed a definitive agreement to acquire Patriot Risk Management, a specialty workers’ compensation risk management firm.
Patriot Risk Management, Inc. and Inter-Atlantic Financial, Inc. Announce Definitive Agreement
- Leading specialty workers’ compensation risk management firm to access equity capital to fuel growth
- Access to public markets expected to accelerate expansion opportunities
- Consideration of 6.9 million IAN shares plus 5.0 million share earn-out
- No external financing required to complete transaction
- IAN stockholders to receive annualized cash dividend of $0.80 per share
On Friday April 24, 2009, 7:52 am EDT
FORT LAUDERDALE, Fla. & NEW YORK--(BUSINESS WIRE)--Patriot Risk Management, Inc. (“PRMI” or “Patriot”), a leader in specialty workers’ compensation risk management services, and Inter-Atlantic Financial, Inc. (“IAN” or “Inter-Atlantic”) (NYSE Amex: IAN), a Special Purpose Acquisition Company, have signed a definitive acquisition agreement in an all-stock transaction. The transaction provides IAN investors with a unique opportunity to participate in a rapidly growing Business Process Outsourcing (”BPO”) firm specializing in workers’ compensation insurance and risk management.
The transaction provides for IAN’s acquisition of 100% of the capital stock of PRMI. Under the terms of the agreement, the stockholders of PRMI will receive 6.9 million shares of IAN common stock at the closing of the transaction. PRMI stockholders will be eligible to receive up to 5 million additional shares of IAN common stock upon the achievement of certain stock price targets over the next five years.
The combined companies will operate as Patriot Risk Management, Inc. and are expected to trade publicly on the NASDAQ Stock Market. The PRMI management team, with significant experience in workers’ compensation claims management, underwriting, product development, distribution, marketing and alternative market and traditional workers’ compensation insurance solutions, will continue to manage the company.
Patriot Risk Management, Inc. is a holding company offering an array of workers’ compensation insurance services and insurance solutions. Through its subsidiaries, Patriot Risk Services, Inc. and Patriot Underwriters, Inc., PRMI provides BPO services to workers' compensation insurance companies, segregated portfolio cell captives and reinsurers. These subsidiaries provide services to PRMI’s insurance subsidiary, Guarantee Insurance Company (“Guarantee”), and its clients, as well as to third party carriers under a rapidly growing private label program. Private label activities include a broad range of alternative market and traditional workers’ compensation products and services, including product design, marketing, distribution, underwriting, policy management, claims management, nurse case management, cost containment services, subrogation recovery, fraud investigation and captive management services. Through its insurance company subsidiary, Guarantee Insurance Company, PRMI provides alternative market risk transfer solutions and traditional workers’ compensation insurance in 25 states.
“We are excited about the transaction with Inter-Atlantic. The significant insurance and financial technology backgrounds of Inter-Atlantic Financial’s management and board makes Inter-Atlantic an excellent fit for Patriot. The transaction provides us with significant capital and access to the public markets, and will allow us to accelerate the growth of our BPO and insurance businesses,” said Steven Mariano, Patriot’s Chairman and Chief Executive Officer. “Our specialized workers’ compensation insurance product and service offerings have gained significant interest in the insurance industry, and this capital enables us to respond to the demand. Having a publicly traded stock will allow us to continue to attract top management talent, enhance our client and agent awareness, and pursue acquisitions of additional fee-based BPO businesses in this attractive market.”
“The 10 founding stockholders of IAN, all career financial services executives, considered over 100 potential merger candidates before agreeing to combine with Patriot,” said Andrew Lerner, Chief Executive Officer of Inter-Atlantic. “Patriot is a very exciting opportunity for Inter-Atlantic Financial and its stockholders. Steve has assembled a high-quality management team with extensive public-company experience and built a workers’ compensation risk management infrastructure with tremendous growth prospects. Inter-Atlantic’s capital will act as a catalyst, allowing PRMI to rapidly increase the premiums it controls, and to dramatically accelerate the earnings growth already being experienced in its BPO business. Patriot’s fee-based business is a major part of the growth story and is consistent with the Inter-Atlantic team’s successful track record of investing in financial services technology and processing companies.”
The proposed transaction is subject to IAN receiving stockholder approval of the transaction, the number of shares owned by public stockholders that vote against the transaction and exercise their redemptions rights being less than 29.99% of the outstanding shares, redemption of outstanding warrants, regulatory approval and other customary closing conditions. It is anticipated that a stockholder vote and transaction closing would occur in the third quarter of 2009.
Transaction Overview:
-- Stock acquisition
- Inter-Atlantic Financial, Inc. to be renamed Patriot Risk Management, Inc.
- Expected to trade on NASDAQ Stock Market
Consideration to Patriot stockholders:
- 6.9 million shares of newly issued IAN Class B Common Stock (no dividend)
- Earn-out up to 5.0 million additional shares in 1.0 million share increments in the event the Class A Common Stock trades above $12, $13, $14, $15, $16 per share (for an average of 20 consecutive trading days) prior to fifth anniversary
- Lock-up of 12 months for substantially all current Patriot stockholders
Directors and Officers
- At closing, all previous executive officers of IAN to resign and executive officers going forward to consist of Patriot’s management team
- Board of Directors to be comprised of the current Patriot Board of Directors plus Andrew S. Lerner and Frederick S. Hammer of IAN
- Stock option plan to be submitted for approval by IAN stockholders
Class A Common Stock, Dividend
- IAN stockholders at the time of closing will become holders of Class A Common Stock
- Class A Common Stock to receive a dividend of $0.20 per quarter
- Class A Common Stock to receive an aggregate of $2.40 in dividends, inclusive of any quarterly dividends, on or prior to a change of control transaction or a liquidation.
- Class B Common Stock to automatically convert into Class A Common Stock upon earlier of payment of $2.40 aggregate dividends to Class A stockholders or Class A shares trading above $11 per share for an average of 20 consecutive trading days
- Following merger of Class A and Class B Common Stock, dividend policy will be reviewed by the Board of Directors
Warrant modification
Patriot not obligated to complete the transaction unless consent is obtained to amend all outstanding warrants so that they are effectively redeemed for cash at closing for no more than $0.50 per warrant
Minimum cash condition
Patriot not obligated to complete the transaction unless IAN has a minimum of $35,000,000 in cash at closing net of transaction expenses and share and warrant redemptions
Incentives for Patriot stockholders and management strongly aligned with performance of Class A Common Stock:
Current Patriot holders will receive Class B Common Stock with no dividend
Class B Common Stock only converts into Class A Common Stock after Class A Common Stock receives $2.40 per share aggregate dividends, or share price exceeds $11 per share, whichever is earlier
Patriot stockholders are not selling any shares in the transaction and substantially all shares of Class B Common Stock may not be sold for at least 12 months
Additional consideration (earn-out) tied directly to Class A Common Stock price and price must exceed $12 to receive any, and $16 to receive all additional consideration
Ongoing management team to be incented with stock options in plan to be presented to IAN stockholders for approval
Freeman & Co. is serving as financial advisor to Patriot Risk Management, Inc. and R.L. Viton & Co., LLC has provided financial consulting services to Inter-Atlantic Financial, Inc.
About Patriot Risk Management, Inc.
Patriot Risk Management, Inc. (“PRMI”) is a workers’ compensation risk management company. Through its subsidiaries Patriot Risk Services, Inc. and Patriot Underwriters, Inc., PRMI provides workers’ compensation BPO insurance services to insurance companies, segregated portfolio cell captives and reinsurers. Through its subsidiary Guarantee Insurance Company, PRMI provides alternative market risk transfer solutions and traditional workers’ compensation insurance plans to employers. For further information, please visit prmigroup.com.
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