PrefBlog

Industrial Alliance Insurance and Financial Services Inc. has announced (emphasis added):

that, following its February 5, 2018 announcement of its intention to create a holding company, it has entered into an arrangement agreement (the “Arrangement Agreement”) with a newly created entity, iA Financial Corporation Inc. (“iAFC”), and that its Board of Directors is unanimously recommending that common shareholders vote in favour of a plan of arrangement (the “Plan of Arrangement”) that, upon completion, would result in iAFC becoming a holding company as well as the parent corporation of the Company.

The purpose of the arrangement transaction (the “Arrangement”) is to adapt the Company’s legal and corporate structure to the group’s current size, allow greater financial and, commercial flexibility in pursuing its growth strategy and better reflect the diversification of its business. It will also provide the Company with a corporate structure that is as flexible as and substantially similar to that of its principal competitors.

In recommending that common shareholders vote in favour of the Plan of Arrangement, the Board of Directors considered and relied on, among other factors, an opinion received from National Bank Financial Inc. to the effect that, subject to the assumptions, limitations and qualifications set out in such opinion, the proposed Arrangement is fair, from a financial point of view, to the Company’s common shareholders.

Under the Plan of Arrangement, the existing assets and liabilities of the Company would, immediately following the Arrangement, remain with the Company, and iAFC would own all of the outstanding common shares of the Company. Common shareholders of the Company would become common shareholders of the new publicly-traded iAFC. Upon shareholder, Court and all statutory and regulatory approvals having been obtained and the subsequent effectiveness of the Plan of Arrangement, the Company’s common shares would be exchanged for common shares of iAFC, on a one-to-one basis, and shareholders would not be required to take any action for the exchange of shares.

Holders of the Company’s then publicly issued and outstanding preferred shares (collectively, the “Preferred Shares”) will remain holders of the Company’s Preferred Shares, and holders of the Company’s then publicly issued and outstanding debentures (collectively, the “Debentures”) will remain holders of Debentures of the Company. The Arrangement Agreement provides as a condition, among others, that iAFC must sign and deliver unconditional and irrevocable guarantees with respect to the Company’s payment obligations on the outstanding Preferred Shares and Debentures.

Further details of the Arrangement will be included in the Company’s Management Proxy Circular (the “Circular”) for the 2018 Annual Meeting of Shareholders and Participating Policyholders to be combined with a Special Meeting of Shareholders to consider the Arrangement that will be held on May 10, 2018 (the “Meeting”), which Circular is expected to be mailed to shareholders in early April. Assuming shareholder approval, the Arrangement would become effective following the Meeting, pending the approval and sanction of the Arrangement by the Superior Court of Quebec (the “Court”) and the authorization of the minister of Finance (Québec) following a report in respect thereof by the Autorité des marchés financiers (Québec) under the applicable provisions of the Act respecting insurance (Québec). It is currently anticipated that the Company will be filing the relevant materials with a view to obtaining an Interim Order from the Court for the Arrangement and the Meeting in the coming weeks.

In addition, the Company notes that it has tabled a private bill with the National Assembly of Quebec, the purpose of which is to specifically permit the Company to proceed with the Arrangement notwithstanding the existing provision in the special statute governing it that prohibits any person (together with its associates) from acquiring, directly or indirectly, voting shares representing 10% or more of the voting rights attached to such shares (the “10% Voting and Ownership Limitation”) and, following which the 10% Voting and Ownership Limitation would apply at the level of iAFC as the new parent and publicly traded holding company. As tabled, the private bill also contemplates that it shall be prohibited for any person to proceed with a transaction as a result of which, following the Arrangement, iAFC would cease to hold, directly or indirectly, 100% of the voting rights attached to the Company’s voting shares.

Norton Rose Fulbright is acting as external legal advisors to the Company with respect to the Arrangement.

I’m very pleased to see that the preferred shares will remain at the operating level – it’s always better to be closer to the money! Structural subordination can, on occasion, be deemed by the Credit Rating Agencies to be worth a notch of credit.

Affected issues are IAG.PR.A and IAG.PR.G, as well as the new issue announced today.

This entry was posted on Monday, February 26th, 2018 at 10:45 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.