Brookfield Corporation
Brookfield Reinsurance agrees to acquire Argo in a US$1.1B all-cash transaction
NYSE: BN | USD 36.85 | Outperform | Price Target USD 53.00
Sentiment: Neutral
Our take: Today's acquisition announcement is not overly surprising as acquisitions are an important component of the growth strategy at Brookfield Reinsurance. If completed, the transaction helps accelerate Brookfield Reinsurance's timeline in achieving scale and also adds to BAM's Fee Bearing Capital and helps further increase Fee Related Earnings.
Summary: Brookfield Reinsurance announced it agreed to acquire Argo Group International Holdings, Ltd. (NYSE: ARGO) for US $1.1B in an all-cash transaction, which implies a valuation of 0.89x P/BV. Argo shareholders will receive US$30.00/share, which is a 6.7% premium to Argo's closing share price on February 7, 2023 and a 48.7% premium to Argo's closing share price on Septemebr 7, 2022, the day prior to Argo announcing it is undergoing a strategic alternatives review process. The transaction is expected to close in H2/23, subject to Argo shareholder approval, regulatory approval and other customary closing conditions. In connection with the transaction, Voce Capital Management LLC, which owns ~9.5% of outstanding shares of Argo, will vote in favour of the transaction.
Argo is a P&C insurer focused on specialty insurance products in the U.S. and international markets. The Company had generated US$1.9B of net written premiums on a last 12-month basis (September 30, 2022) and delivered a combined ratio of 103.9% and an operating ROE of +1.9%. We note Argo had US$4.9B of investments on its balance sheet as of Q3/22.