The National Security Group, Inc. and VR Insurance Holdings, Inc. (“VR Holdings”) announced that they have entered into a definitive merger agreement, under which VR Holdings has agreed to acquire all of the outstanding common shares of The National Security Group, Inc. (“NSG” or the “Company”) for $16.35 per share in cash, representing a 77% premium to the closing share price .
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Total transaction value is approximately $41.4 million, subject to certain provisions[1]. VR Holdings is a newly formed Delaware company founded by Vivek Ranadivé. Mr. Ranadivé has been the Founder and Managing Director of Bow Capital Management LLC and its affiliated funds since 2016 and Chairman, Chief Executive Officer and Governor of the Sacramento Kings since 2013.
“By combining our 75-year history of stability, underwriting expertise and commitment to our policyholders with the financial resources of the investor group led by Mr. Ranadivé, we expect to realize greater opportunities for growth and an enhanced ability to serve our policyholders and agent partners.”
“We believe this transaction is in the best interest of NSG’s shareholders and policyholders,” said William L. Brunson, Jr., Chief Executive Officer of NSG. He said, “By combining our 75-year history of stability, underwriting expertise and commitment to our policyholders with the financial resources of the investor group led by Mr. Ranadivé, we expect to realize greater opportunities for growth and an enhanced ability to serve our policyholders and agent partners.” Mr. Brunson also noted that shareholders will benefit from the significant premium to recent share prices.
The Company’s Board of Directors has unanimously approved the transaction and recommended that NSG’s shareholders vote in favor of the transaction. The agreement requires approval by holders of the majority of NSG’s outstanding common shares. The acquisition is expected to close by the end of the second quarter of 2022, subject to customary closing conditions, including receipt of certain required regulatory approvals and approval of NSG’s shareholders. There are no financing conditions associated with the definitive merger agreement.
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Following closing, it is anticipated that VR Holdings will continue to leverage the existing operations and infrastructure of NSG’s wholly owned property and casualty and life insurance subsidiaries. The Company’s current Chief Financial Officer, Brian McLeod, will serve as Chief Operating Officer of the Company’s insurance subsidiaries and will also serve as VR Holdings’ Chief Financial Officer. NSG remains fully committed to its policyholders and its independent agent partners and expects no immediate changes in its day-to-day business operations. Upon completion of the transaction, NSG will become a private company with the flexibility and capital to accelerate its next stage of growth. Mr. McLeod will work closely with the management team including Ross Aron, CEO of VR Holdings, and the investor group to continue the Company’s expansion.
[1] The price per share is subject to downward adjustment if the combined statutory capital and surplus of NSG’s insurance subsidiaries is less than $43 million; VR Holdings can terminate the agreement if combined statutory capital and surplus falls below $38.7 million. The insurance subsidiaries are expected to exceed the $43 million threshold in their statutory financial statements.
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