StoneRidge Advisors, LLC provides a fairness opinion to North American Insurance Leaders, Inc. in conjunction with the acquisition of businesses of Deep South Holding, L.P., a leading managing general insurance agency
8/10/2007
NEW YORK (August 10, 2007) /PRNewswire-FirstCall/ – North American Insurance Leaders, Inc. (Amex: NAO), a special purpose acquisition corporation, announced today the signing of a definitive agreement to acquire the businesses of Deep South Holding, L.P. ("Deep South"), one of the largest managing general insurance agencies in the United States.
"We are pleased to announce this partnership with Deep South. As one of the nation's largest and most profitable commercial insurance distributors, Deep South represents an attractive platform for future growth," said William R. de Jonge, president of NAO. "Its established industry relationships, well- developed infrastructure and superior operating margins position Deep South as a leader and potential consolidator in a fragmented segment of the market."
NAO Chairman of the Board Scott Levine added, "We considered many attractive acquisition candidates, but the combination with Deep South stands out as an unparalleled opportunity to build significant shareholder value over both the short and long term."
Founded in 1967, Deep South is a full service distributor of commercial insurance products. Deep South markets its products through more than 2,000 independent agents located in 24 states. For the year ended December 31, 2006, Deep South had $224 million of gross premiums and net revenues of $52.9 million, the majority of which represented commissions and fees for commercial auto insurance policies. For the same period, Deep South produced $15.1 million of EBITDA (Earnings Before Interest, Depreciation and Amortization), resulting in a 28.5 percent margin.
"Over the last 40 years, Deep South has focused on serving independent agents and their customers, as well as producing an underwriting profit for our insurance company partners," said Deep South spokesman Roy Horton. "We are enthusiastic about partnering with North American Insurance Leaders and look forward to the new markets and opportunities this partnership will bring."
Under the terms of the agreement, NAO will acquire Deep South for an initial estimated payment of $110 million. The initial consideration will be equal to 5.94 times the pro forma EBITDA of Deep South's businesses for the period ended December 31, 2007. The initial payment will comprise approximately 83 percent cash and 17 percent shares of NAO common stock. Additionally, Deep South shareholders will have the opportunity to receive up to approximately $65 million in cash and stock through an earn-out arrangement based on the future financial performance of the acquired company over the two years following closing.
The combined company, which will operate under the name Deep South Group, Inc., will trade on the American Stock Exchange and be headquartered in Dallas, Texas. NAO anticipates completing the transaction by the end of first quarter of 2008, following a vote of its shareholders and standard regulatory approvals and notices.
StoneRidge Advisors, LLC provided a fairness opinion to NAO.