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U.S. Firm Agrees to Acquire Fidelity & Guaranty Life

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CF Corp., an investment firm based in the Cayman Islands, has agreed to acquire Fidelity & Guaranty Life, a midsize issuer of life insurance and indexed annuity products, for $31.10 per share in cash.

The total value of the deal could be about $1.8 billion, and CF Corp. will also assume $405 million in Fidelity & Guaranty Life debt, the companies said today in the deal announcement.

(Related: Ares, Blackstone Said Among Bidders for Fidelity & Guaranty Life)

Fidelity & Guaranty Life is now based in Des Moines, Iowa. It has large offices in Baltimore, its previous headquarters city, and in Lincoln, Nebraska.

William P. Foley II, the co-chairman of CF Corp., said that his company wants to keep Fidelity & Guaranty Life’s current operations in place in those three cities. Chris Littlefield, Fidelity & Guaranty Life’s president, and other company executives would continue to run the company, Foley said.

Foley said CF is hoping “efficient structuring and improved investment management capabilities” will help Fidelity & Guaranty Life generate attractive returns while continuing to provide retirement savings products.

Fidelity & Guaranty

A property-casualty insurer founded Fidelity & Guaranty Life in 1959.

Old Mutual P.L.C., a large insurer now based in the United Kingdom, acquired the company in 2001 and used it as a base for entering the U.S. indexed annuity market.

HRG Group Inc., a New York-based investment firm, acquired control over Fidelity & Guaranty Life in 2011. HRG, which is still the company’s largest shareholder, put its stake in Fidelity & Guaranty Life up for 2015, after losing money on a loan to Radio Shack.

Fidelity & Guaranty Life has a fiscal year that starts Oct. 1. The company reported $22 million in net income for the first quarter of calendar year 2017 on $375 million in revenue, up from $9 million in net income on $233 million in revenue for the first quarter of 2016.

The company’s annuity sales increased to $732 million, from $601 million.

Indexed universal life sales increased to $14 million, from $11 million.

Total assets under management increased to $20.2 billion, from $18.5 billion.

Anbang Insurance Group Co., a Chinese company, agreed to acquire Fidelity & Guaranty Life. The deal fell through in April, after the companies had trouble getting regulatory approval for the deal.

CF Corp.

CF Corp. identifies itself as a company that’s based in the Cayman Islands. It lists Las Vegas as its headquarters in the press release announcing the Fidelity & Guaranty Life deal.

The header for the CF Corp. documents filed with the U.S. Securities and Exchange Commission gives a business address on Madison Avenue in New York.

Foley and Chinh Chu, the other CF Corp. co-chairman, raised about $600 million in cash from investors about a year ago through an initial public offering of common stock.

Before founding CF Corp., Chu was a senior managing director at Blackstone, a major investment firm. He worked at Blackstone from 1990 through 2015. While there, he served on the board of HealthMarkets Inc., a company that distributes supplemental health insurance products and other insurance products, according to the CF Corp. IPO registration statement.

Abstract image (Image: Thinkstock)

(Image: Thinkstock)

Curbed New York ran a slideshow in 2014 that identified Chu as a billionaire and presented 49 photos of his penthouse apartment in New York.

Foley spent 32 years working as a director and executive officer at Fidelity National Financial, a title insurance provider, and Fidelity National Financial’s sister company, FNFV Group. FNF provides technology and support services to companies in the real estate and mortgage lending industries.

The founders said in the registration statement that they wanted the company to be a “blank check company” that would eventually acquire and transform a financial, technology or services company.

One of the companies that invested CF Corp., Blue Pool Capital Ltd., has ties to the founders of the Alibaba Group, a Chinese e-commerce company. Blue Pool acquired a 7.2% stake in CF Corp. The other companies that filed ownership reports with the SEC appear to be non-Chinese.

The Deal

CF Corp. says it will pay for the acquisition with cash from its IPO and with about $700 million cash from the sale of new shares common and preferred stock.

A Blackstone affiliate and Fidelity National Financial are also agreeing to fill in if $300 million in other financing falls through.

A fund advised by units of Blackstone and Fidelity National Foundation “have provided a full backstop funding commitment to ensure certainty of funding,” according to CF Corp. and Fidelity & Guaranty Life.

Fidelity & Guaranty Life will use investment management services from Blackstone along with its current investment team, according to CF Corp. and Fidelity & Guaranty Life.

CF Corp. intends to acquire two or more HRG reinsurance units along with Fidelity & Guaranty Life, the companies say. A copy of the deal agreement filed with the SEC shows CF Corp. will need approval from Vermont regulators for the acquisition of one of the reinsurance units.

The companies hope to complete the deal by the end of the year.

— Read Old Mutual Rolls Out 3 EIAs on ThinkAdvisor.