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Jax Daily Record Tuesday, Aug. 12, 201412:00 PM EST

Fortegra Financial agrees to $218M buyout agreement from Tiptree

by: Mark Basch Contributing Writer

Less than four years after going public, Fortegra Financial Corp. announced Tuesday a buyout agreement that allows the Jacksonville-based insurance services company to keep its operations intact.

Tiptree Financial Inc. agreed to buy Fortegra for $10 per share in cash, a total of about $218 million.

Fortegra Chairman and CEO Richard Kahlbaugh said in a telephone interview that Tiptree intends to allow Fortegra to retain its “independence and autonomy” after the buyout is completed, which is expected late this year or in early 2015.

Kahlbaugh said he and the rest of Fortegra’s management will remain intact and the company will remain in its current offices in the Deerwood South business park. The company employs about 300 people in Jacksonville and 500 in total.

“I wouldn’t expect anything to change here,” said Kahlbaugh, although he expects the operations to continue growing.

“Rick and his team have built a deep and experienced organization with a very strong market position and we are looking forward to working closely with them to take advantage of future growth opportunities and drive value for all shareholders,” Tiptree CEO Geoffrey Kauffman said in a news release.

New York-based Tiptree is a publicly traded holding company that describes itself as “an active acquirer of new businesses,” with subsidiaries operating in four areas: insurance and insurance services, specialty finance, asset management and real estate.

Tiptree’s insurance segment consists of a life insurance and annuity company called Philadelphia Financial Group Inc. and a third-party life insurance administrative firm called Philadelphia Financial Administrative Services Co.

“They don’t do what we do,” Kahlbaugh said.

Fortegra provides a range of services and products for insurance companies, including payment protection products, motor club memberships, service contracts, device and warranty services, and administration services.

Fortegra is much bigger than Tiptree’s current insurance services businesses, with $347.9 million in revenue last year. Tiptree’s insurance segment recorded $47.9 million in revenue and had 111 employees at the end of 2013, according to Tiptree’s annual report.

Fortegra on Monday reported total revenue of $179.1 million in the first half of this year. Net income was $6.2 million, or 31 cents a share.

The company was formerly known as Life of the South before changing its name to Fortegra in 2009, a year before its initial public offering.

Shortly after the IPO in December 2010, Fortegra moved out of the Life of the South building Downtown at 100 W. Bay St. to its current headquarters at 10151 Deerwood Park Blvd.

Boston-based Summit Partners LP had acquired a controlling interest in Life of the South in 2007 by paying $98 million for a 91 percent stake in the business.

Summit took the company public in 2010 but retained a majority stake, with 62 percent of the stock.

“In essence, what we did (with the buyout agreement) was swap out Summit with Tiptree,” Kahlbaugh said.

Fortegra’s stock was priced at $11 in the IPO but it has traded below that level since the early months of 2011. It had been trading near the $7 level recently and closed Monday at $7.02, before the $10-a-share buyout agreement was announced Tuesday morning.

“We had been trading at a price the board felt was not reflective of our value,” Kahlbaugh said.

He said the buyout creates value for shareholders, with the price representing a 42.5 percent premium to Monday’s closing price.

Summit has already signed off on the buyout and since it owns a majority of shares, no additional stockholder approvals are necessary to complete the deal, Fortegra said.

The merger agreement includes a 30-day “go-shop” period in which Fortegra’s board of directors could potentially receive higher offers. However, Kahlbaugh is happy with the agreement with Tiptree.

“Really this is a win-win for everyone,” he said.

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