Pethealth Inc. (“Pethealth”), the second largest provider of pet health insurance in North America, acquired Pet Protect Limited (“Pet Protect”), a pet insurance intermediary, from Domestic & General Group Limited (“D&G”) of the United Kingdom.
Pethealth acquired 100% of Pet Protect for a purchase price of £3.5-million (C$7-million) in an all cash transaction. The purchase price represents 27% of fiscal 2007 gross written premiums placed by Pet Protect. Pet Protect had no debt or long term liabilities on its balance sheet as at closing. The purchase price being paid for the company represents approximately £64.50 (C$129) per paid policy in force. Pet Protect currently places insurance for over 54,300 dogs and cats, representing approximately 3% of the U.K. market. Policies in the U.K. are sold under both the Pet Protect and the PetPals brands. Distribution partners currently include Animalcare Group PLC, the leading provider of RFID microchip technology for companion animals in the U.K. Over the years, the Pet Protect brand has become both known and trusted by dog and cat owners throughout the U.K.
Pet Protect Highlights:
“The acquisition of Pet Protect represents another significant milestone in Pethealth’s history and provides us with a beachhead in the world’s largest pet insurance market,” said Mark Warren, President and Chief Executive Officer of Pethealth. “Moreover, this acquisition establishes us as the most diversified provider of pet health insurance, complementing our significant market share in both the United States and Canada. Given our Company’s successes to date, particularly as the most efficient administrator of pet health insurance, this acquisition provides us with the ability to scale up our core pet insurance operations significantly, providing considerable earnings potential for the future.”
Under the terms of the Pet Protect transaction, Pethealth will acquire all of the outstanding shares of Pet Protect from D&G. The purchase price of £3.5-million (C$7-million) does not include a purchase price adjustment related to the pre-acquisition intergroup accounts of the vendor which will be settled by the vendor. The purchase price adjustment of approximately £600,000 (C$1.2-million) is a flow-through transaction and is cash neutral to Pethealth. The transaction is being made to satisfy tax considerations of the vendor.
The all cash transaction is being financed through a 3-year loan agreement with a recognised financial institution at a fixed interest rate of 4.52%. The security for the loan is being provided by Pethealth using the policy renewals on its U.S. book of business which is underwritten by Praetorian Financial Group, a wholly owned subsidiary of QBE the Americas. The terms of the loan restrict the Company from paying dividends other than to holders of the Company’s Series I 6% convertible preferred shares. QBE Insurance ( Europe) Limited has agreed to act as the underwriter for the Pet Protect business on a renewals basis. As the Pet Protect policies have annual renewals, D&G will continue to act as an underwriter on a declining basis for approximately the next twelve months until such time as all existing policies have been moved to QBE. No agency fees have been paid by Pethealth to any third party in the arrangement of the acquisition or the financing.
Founded in 1998, Pethealth is the second largest provider of pet insurance to pet owners in North America, and the leading provider of pet related database management services to the North American companion animal industry. Pethealth offers a unique range of products and services for veterinarians, shelters and pet owners through a number of wholly owned subsidiaries using a range of brand names, including PetCare, ShelterCare, 24PetWatch,PetPoint, and PawsConnect.com.
To find out more about Pethealth, visit www.pethealthinc.com
Pet Protect Ltd