Merchant bank Kingsway Financial Services Inc. (TSX:KFS) says it has signed a definitive agreement to acquire the assets and liabilities of an unnamed specialty insurance business for an undisclosed price.
The company, an insurer of high-risk drivers, said Tuesday that the deal involves cash, future contingent payments and equity in the newly formed business.
Kingsway expects the business to be immediately accretive to operating earnings and cash flow.
“This acquisition represents the type of opportunity we expect to pursue more frequently as we continue to focus on rebuilding shareholder value at Kingsway,” said Larry Swets, Kingsway’s president and chief executive officer.
“We will be acquiring an interesting business at an attractive price using a creative structure which is intended to significantly shield the company from downside risk while allowing it to participate in the value that can be generated under Kingsway’s leadership.”
Kingsway said it would release more details about the deal after it closes, which is expected in the second quarter.
Kingsway’s main business is providing auto insurance to drivers who do not meet the criteria for coverage by standard automobile insurers.
The company announced a reverse stock split in January in order to remain in compliance with New York Stock Exchange listing standards.
The stock (NYSE:KFS) has recently been trading in the 63-cent range, while the exchange’s listing standards require that the closing price of a stock not be under US$1 over a consecutive 30- trading-day period.
The company said it planned the stock consolidation in conjunction with reviewing various other strategic alternatives “including possible acquisitions or mergers to enhance shareholder value.”