The deal anticipates a future IPO for the specialty insurance company.
After canceling plans in April for an initial public offering, Fortegra Group’s owner announced a significant investment in the Jacksonville-based company that could lead to an IPO in the future.
Tiptree Inc. announced Oct. 12 that investment firm Warburg Pincus will buy $200 million of Fortegra securities, giving it a 24% stake in the specialty insurance company.
“Our primary strategic objectives in this transaction are to source growth capital for Fortegra, to refine and recapitalize our balance sheet and to create greater transparency of Fortegra’s value and thereby seek to close the gap between Tiptree’s stock price and our intrinsic value,” Tiptree Executive Chairman Michael Barnes said in a conference call.
New York-based Tiptree bought Fortegra in 2014, and Fortegra is its major operating business.
Fortegra’s revenue rose 54% in the first six months of this year to $475 million. Tiptree’s total revenue in the first half of the year was $594 million.
When Tiptree announced plans in March for a Fortegra IPO, it said it was hoping the deal would unlock unrecognized value for Tiptree’s stock.
During the Oct. 12 call, Tiptree Chief Financial Officer Sandra Bell said the Warburg Pincus investment values Tiptree’s stake in Fortegra at $16.40 per Tiptree share.
Bell said that brings the sum-of-the-parts value of Tiptree’s stock to $23.50, but the stock’s trading price closed at only $10.48 the week before the new investment announcement.
Tiptree’s stock jumped to a high of $16.32 by Oct. 18 after the announcement.
“As we have discussed with our investors since we pulled the Fortegra IPO in April, we were looking to find the right strategic intermediate step that would lead to long-term value creation for Tiptree shareholders,” Barnes said.
“We believe this partnership achieves that objective.”
Tiptree indicated when it pulled Fortegra’s IPO off the market that it could not get the price it wanted to sell shares in the insurance company.
The agreement with Warburg Pincus anticipates another attempt at an IPO in the future. Four years after closing the deal, expected in the first quarter of 2022, Warburg Pincus “may request a qualifying initial public offering of Fortegra,” Tiptree said in a Securities and Exchange Commission filing.
Barnes said Tiptree is keeping its options open for Fortegra.
“We also believe this investment will position Fortegra well for any future strategic transaction,” he said.
International Baler brings back CEO
International Baler Corp. said in an Oct. 15 SEC filing that D. Roger Griffin was appointed president and CEO.
Griffin previously served as CEO of the Jacksonville-based maker of balers used for waste disposal and recycling from 2008 to January 2017.
After leaving International Baler, Griffin became vice president of manufacturing for Avis Industrial Corp., the largest shareholder of International Baler with 81% of the stock.
The SEC filing said Griffin did not enter into an employment contract and is an at-will employee of the company.
Victor Biazis resigned as CEO on Sept. 24 to return to his position as president and CEO of Coastal Industrial Products Inc., a Ponte Vedra Beach-based industrial adhesives company he founded.
International Baler Chief Financial Officer William Nielsen, who also is a former CEO of the company, had been serving as interim CEO before Griffin’s appointment.
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