HC2 Holdings' Insurance Segment to be Acquired for $90M

HC2 Holdings' insurance segment to be acquired by Continental General Holdings for a total potential transaction value of ~$90M, comprising $65M in cash. The acquisition is subject to due diligence and negotiations. HC2 Holdings' stock price increased 7.05% after the announcement.

The insurance industry is witnessing a wave of consolidation, with HC2 Holdings, Inc. (HC2) being the latest player to join the fray. On July 1, 2021, HC2 announced the completion of the sale of its insurance segment, Continental Insurance Group Ltd., and its subsidiaries, Continental General Insurance Company and Continental LTC Inc., to Continental General Holdings LLC [1]. The total transaction value is estimated to be approximately $90 million, comprising $65 million in cash and securities.

This divestiture marks a significant milestone for HC2, which has been focusing on its three core operating segments: Infrastructure, Life Sciences, and Spectrum. By shedding its insurance business, HC2 aims to enhance its financial flexibility and better support its remaining assets. Over the past few months, HC2 has refinanced its balance sheet and made a strategic acquisition of Banker Steel in its Infrastructure segment [1].

The acquisition of HC2's insurance segment by Continental General Holdings, an entity controlled by Michael Gorzynski, is subject to due diligence and negotiations. Gorzynski, a director of HC2 and beneficial owner of approximately 6.6% of its outstanding common stock, is the managing member of MG Capital Management, Ltd., and has also served as executive chairman of Continental since October 2020 [1].

Gorzynski expressed confidence in the deal, stating that it helps HC2 meet its strategic objectives while positioning Continental to expand its footprint and pursue new opportunities [1]. He also emphasized the importance of prioritizing policyholders in the new organization.

The transaction was approved by HC2's Board of Directors, excluding Gorzynski and Kenneth Courtis, who recused themselves from the deliberations [1]. Duff & Phelps served as financial advisor to HC2 in connection with the transaction and issued a fairness opinion to its Board of Directors [1].

This strategic move by HC2 is expected to have a positive impact on its financial performance and growth prospects. As the insurance industry continues to consolidate, similar deals are likely to emerge, reshaping the competitive landscape.

References:
[1] HC2 Holdings, Inc. (2021, July 1). HC2 Holdings Completes Sale of Continental Insurance Business for $90 Million. Retrieved from https://www.globenewswire.com/news-release/2021/07/01/2256827/0/en/HC2-Holdings-Completes-Sale-of-Continental-Insurance-Business-for-90-Million.html