Specialty Insurance Sub Fortegra valued at less than BV with stock at $10.75. Deal announced this morning with Warburg Pincus values Fortegra at about 2X BV for 20-25% of the business and recasts the corporate balnce sheet by paying off intercompany debt.
Fortegra: nice specialty insurence business they bought in 2014 and have grown and improved since. low 90s CR, mid/high teens ROE. BV (pre-deal) $8.50.
Tip Tree Capital: the investment piece (outside of Fortegra). own fiancials (mortgage) and real assets (shipping and senior care). BV $5.50. let's say it's worth BV to be conservative.
Corporate: was negative $2.60 due to intercompany debt, now positive $1.83 post deal).
Total: impled value of Fortegra $16.20 , TC $5.52 and corp (cash):$1.83 = $23.55.
Yes, i know it will not trade at $23.55 but it will not stay at $10.75 either
I do not hold a position with the issuer such as employment, directorship, or consultancy. I and/or others I advise hold a material investment in the issuer's securities.
Catalyst
Warburg transaction highlights value of Fortegra specialty insurance and likely results in faster growth and highe rprofile going forward.
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