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Shareholders accept new investors’ offer to recapitalise

By Bankole Orimisan
21 September 2020   |   3:02 am
The on-going recapitalisation exercise in the insurance sector may have hit a “high gear”, as operators are now enhancing their liquidity position with the sale of assets that are less-mandatory.

The on-going recapitalisation exercise in the insurance sector may have hit a “high gear”, as operators are now enhancing their liquidity position with the sale of assets that are less-mandatory.

The move, aimed at closing the gaps in the required share capital in line with the new minimum threshold, is yielding positive results for some.

While earnings by the industry operators could serve as a means to shore up capital, others are opting for capital raise at the market or planning mergers and acquisitions.

To meet the September 2021 recapitalisation deadline given by the National Insurance Commission (NAICOM) to all underwriting companies to upgrade their capital to the new threshold, Cornerstone Insurance Plc, said it is working towards meeting the capital requirement as directed by the Commission.

This comes as shareholders of the Law Union and Rock Insurance Plc, weekend, accepted an offer of N1.23 per share for every 50 kobo ordinary share they held from the new owner of the firm, Verod Capital Management.

According to the firm, the Board secured the exit payment from its new investor to get full value for the investment for the company shareholders.

The offer was secured from Verod Capital to purchase the entire issued share capital of the insurer, to which it signed a Transaction Implementation Agreement (TIA) with Verod, through its investment vehicle, Kanuri LUR Limited that set out the broad framework for the acquisition by Kanuri LUR.

The agreement for the exit payment was reached by the Board and shareholders of Law Union and Rock Insurance at its court-ordered, 51st annual general meeting in Lagos, at the weekend, where the Scheme of Arrangement for the proposed acquisition of the company was discussed.

The development is due to the mandatory regulation by NAICOM, which raised the minimum paid-up share capital of all insurance and reinsurance companies; hence, the minimum paid-up capital for underwriters was increased from N3 billion to N10 billion.

However, the proposed transaction as contained in the TIA is expected to involve the transfer of a total of 4,296,330,500 ordinary shares of 50 kobo each of Law Union held by shareholders of 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 will become fully held by Kanuri LUR and its designated nominee.

Subsequently and upon the scheme becoming effective, Law Union is expected to be delisted from the main board of the Nigerian Stock Exchange (NSE).

The registration of the ordinary shares of the insurer with the Securities and Exchange Commission (SEC) will be withdrawn, and the company will be re-registered as a private company limited by shares.

Speaking at the weekend, Chairman, LUR Insurance, Remi Babalola, said they initially explored merger discussions with other insurance companies and communicated initial recapitalisation plan to NAICOM.

He, however, noted that they found that the Law Union would not maximise shareholders’ 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.

The Managing Director, Law Union, Ademayowa Adeduro, on his part, said historically, the organisation performed excellently especially since its acquisition by the consortium of investors, Alternative Capital Partners and Swanlux Solutions and Services Limited, in 2012.

The investors had embarked on a transformation and restructuring process that enabled the company to align its offerings to the unique needs of the various sectors of the economy.

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