North American Insurance Leaders Inc., a special purpose acquisition corporation, announced on Friday that it agreed to acquire Deep South Holding, L.P., an Irving, Texas-based managing general agency, for at least $110 million.
Under the terms of the agreement, the company will pay $110 million for the MGA initially–with 83 percent coming in cash and the rest in shares of North American Insurance Leaders common stock.
Additionally, Deep South shareholders will have the opportunity to receive up to $65 million in cash and stock depending on the future financial performance of the acquired company over the two years following closing.
William R. de Jonge, president of North American Insurance Leaders, pointed to Deep South's "established industry relationships, well-developed infrastructure and superior operating margins" as factors making the MGA an attractive target, noting that these factors position Deep South as a potential consolidator in a fragmented market segment.
The combined company, which will operate under the name Deep South Group Inc., will trade on the American Stock Exchange and be based in Dallas.
North American Insurance Leaders anticipates completing the transaction by the end of first-quarter 2008, following a vote of its shareholders and standard regulatory approvals and notices.
Formed in 2005, North American Insurance Leaders described itself in an initial filing with the Securities & Exchange Commission as "a blank check company…formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, capital investment, stock purchase and/or other similar transaction with one or more insurance-related businesses in North America."
North American Insurance Leaders raised net proceeds of approximately $110 million through an initial public offering in March 2006, led by CRT Capital Group LLC.
Deep South is a full-service distributor of commercial insurance products operating through 12 offices located throughout the United States–mainly in the South, but also including a branch office in Ohio serving the upper Midwest.
According to the MGA's Web site, www.deep-south.com, commercial insurance products include its primary product–commercial auto insurance–as well as commercial property and liability packages and inland marine coverage.
Founded in 1967, Deep South markets its products through more than 2,000 independent agents located in 24 states.
For the year ended Dec. 31, 2006, Deep South had $224 million of gross premiums and net revenues of $52.9 million, the majority of which represented commissions and fees for commercial auto insurance policies.
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