Insurance Acquisition Corporation
PROPOSED BUSINESS COMBINATION: Shift Technologies
ESTIMATED CURRENT FUNDS in TRUST: $153.1 million*
CURRENT PER SHARE REDEMPTION PRICE: $10.16*
ENTERPRISE VALUE: $423.6 million
*SPACInsider estimate a/o 10-11-20
Insurance Acquisition Corp. proposes to combine with Shift Technologies, an e-commerce platform on a mission to make car-buying convenient, fair, and accessible for everyone. In connection with the closing of the transaction, Insurance Acquisition Corp. intends to change its name to Shift Technologies, Inc. and remain NASDAQ-listed under a new ticker symbol. The transaction is expected to close in the third quarter of 2020.
Shift is an automotive e-commerce company with a technology platform that delivers a comprehensive and seamless car ownership experience. Shift allows its customers to buy, sell and finance cars in a simple and quick process. Combining both a “buy it now” option for customers to purchase a vehicle sight unseen with its concierge service, that allows customers to request a test drive at their home or work, as well as proprietary point-of-sale software, Shift enables the discovery, test drive, purchase and financing of pre-owned vehicles to consumers without visiting a physical place of business. Leveraging its five regional reconditioning centers and efficient consumer purchasing offering, Shift is able to address the entire spectrum of used cars, regardless of sales price.
By targeting urban, densely populated markets, Shift has used machine learning and a “speed to lead” sales approach to grow its market penetration to over 4% in its top-performing cities within the San Francisco market. With current operations in five markets, which together account for 8% of the U.S. population, Shift has a significant runway for continued expansion.
TRANSACTION OVERVIEW
- Aggregate consideration of approximately $380 million in Insurance Acquisition Corp. (38,000,000 shares of Company Common Stock, subject to adjustment)
- Plus an additional 6 million shares of Class A common stock that will be earned if the combined company achieves certain price targets over time.
- Institutional investors, including Fidelity Management & Research Company, LLC, and ArrowMark Partners, have committed to a $185 million private purchase of Insurance Acquisition Corp. Class A common stock that will close concurrently with the business combination.
- The combined company will retain up to $300 million of cash following the transaction, which will be used to support working capital and fund growth.
PIPE
- PIPE Investors have committed to subscribe for and purchase up to 18,500,000 shares of Company Common Stock (the “PIPE Shares”) at a purchase price per share of $10.00. In addition, an affiliate of the Sponsor is permitted under its PIPE Subscription Agreement to purchase up to an additional 1,300,000 PIPE Shares, subject to certain limitations.
EARNOUT
6,000,000 shares of Company Common Stock (the “Additional Shares”) to be placed in escrow at the Closing of the merger, to be released according to the following:
- If the reported closing sale price of the Company Common Stock does not exceed $12.00 per share for 20 out of any 30 consecutive trading days during the first 12 months following the Closing (the “First Threshold”), then 3,000,000 Additional Shares will be returned to the Company (and either placed into treasury or retired, in the discretion of the Company).
- If the First Threshold is reached, such Additional Shares will be released from escrow to the respective Shift Stockholders that are the holders thereof.
- If the reported closing sale price of the Company Common Stock does not exceed $15.00 per share for 20 out of any 30 consecutive trading days during the first 30 months following the Closing (the “Second Threshold”), then fifty percent (50%) of the Additional Shares will be returned to the Company (and either placed into treasury or retired, in the discretion of the Company).
- If the Second Threshold is reached, such Additional Shares will be released from escrow to the respective Shift Stockholders that are the holders thereof.
- The Shift Stockholders are entitled to vote all of the Additional Shares while they are held in escrow.
NOTABLE CONDITIONS TO CLOSING
- Parent shall have at least $100,000,000 in cash and cash equivalents after giving effect to the Closing (taking into account, among other things, the exercise by the holders of shares of Company Common Stock issued in the Company’s initial public offering of securities and outstanding immediately before the Closing of their right to redeem such shares
NOTABLE CONDITIONS TO TERMINATION
- Mutually, if the Merger has not been consummated by December 31, 2020
ADVISORS
- Wells Fargo is acting as exclusive financial advisor to Shift and the Sole Placement Agent to Insurance Acquisition Corp.
- Cantor Fitzgerald, Wells Fargo, William Blair and Northland Capital Markets are acting jointly as Capital Markets Advisors.
- Jenner & Block is acting as legal advisor to Shift.
- Morgan, Lewis & Bockius is acting as legal advisor to Insurance Acquisition Corp.
- The Blueshirt Group is acting as investor relations and public relations advisor to Shift.
- Latham & Watkins is acting counsel to the Placement Agent for this transaction.
- O’Melveny & Myers is acting as counsel to Shift’s stockholders.
INSURANCE ACQUISITION CORP. MANAGEMENT & BOARD
Executive Officers
John M. Butler, 43
President & Chief Executive Officer
Since October 2017, Mr. Butler has served as Head of U.S. Insurance Debt Strategy and Global ILS Platform for Cohen & Company LLC. Before that, from October 2012 to October 2017, Mr. Butler worked for Twelve Capital AG, a European asset manager specializing in investment in the insurance sector, where he served in various roles including Managing Partner & Head of Investment Management. From January 2010 to September 2012, Mr.Butler worked as Senior Underwriter managing the International Catastrophe and Terrorism reinsurance portfolios of Hannover Re Bermuda Ltd, a reinsurance company, and before that, from August 2002 to October 2009, he served in various roles with White Mountains Re, a reinsurance company. Mr. Butler began his career in 1997 as an Underwriting Assistant, Marine, at The Imperial Fire & Marine Re-Insurance Company. Mr.Butler holds an honors degree in Law from the University of London, is an Associate of the Chartered Insurance Institute of the UK, a member of the Insurance Institute of Ireland and is qualified as a Chartered Insurer.
Paul Vernhes, 48
Chief Financial Officer
Mr. Vernhes has served in various roles with Cohen & Company since 2005, where he is currently a Managing Director of Cohen & Company Financial Limited, Cohen & Company’s wholly-owned U.K. subsidiary, and is President of Cohen & Compagnie SAS, Cohen & Company’s wholly-owned French subsidiary in charge of credit analysis for European financial institutions funded by the group’s investment vehicles. Vernhes has been responsible for the insurance credit analysis for Cohen & Company’s Dekania Europe and PriDe Europe programs. Mr. Vernhes also served, from February 2006 to March 2009, as Chief Financial Officer of Dekania Corp., a special purpose acquisition company established by Cohen & Company, LLC, focused on acquiring businesses that operate within the insurance industry. From January 2004 to April 2005, Mr. Vernhes was the Chief Financial Officer of Corifrance, the French reinsurance subsidiary of Markel Corp. Prior to and in addition to his role as Chief Financial Officer, Mr. Vernhes served as a treaty and facultative reinsurance underwriter for Corifrance in Europe and Latin America. Previously, Mr. Vernhes served as a strategy and management consultant to the insurance industry at A.T. Kearney and Deloitte & Touche Consulting Group. Mr. Vernhes is a graduate of the Ecole de Hautes Etudes Commerciales (HEC) and holds a M.Sc. in Finance from the London School of Economics.
Joseph W. Pooler, Jr., 53
Chief Accounting Officer & Treasurer
Mr. Pooler has served as Executive Vice President, Chief Financial Officer and Treasurer of Cohen & Company Inc. since December 2009, as Cohen & Company, LLC’s Chief Financial Officer since November 2007 and as Chief Administrative Officer since May 2007. From July 2006 to November 2007, Mr. Pooler also served as Senior Vice President of Finance of Cohen & Company, LLC. From November 2007 to March 2009, Mr. Pooler also served as Chief Financial Officer of Muni Funding Company of America, LLC, a company investing in middle-market non-profit organizations. Prior to joining Cohen & Company, LLC, from 1999 to 2005, Mr. Pooler held key management positions at Pegasus Communications Corporation (now known as The Pegasus Companies, Inc. (OTC: PEGX)), which operated in the direct broadcast satellite television and broadcast television station segments. While at Pegasus, Mr. Pooler held various positions including Chief Financial Officer, Principal Accounting Officer and Senior Vice President of Finance. From 1993 to 1999, Mr. Pooler held various management positions with MEDIQ, Incorporated, including Corporate Controller, Director of Operations and Director of Sales Support.
Board of Directors
Daniel G. Cohen, 49
Chairman of the Board
Since February 21, 2018, Mr. Cohen has served as the Chairman of the Board of Directors and of the Board of Managers of Cohen & Company, LLC, and has, since September 16, 2013, served as the President and Chief Executive of the European Business of Cohen & Company Inc. (NYSE: COHN), a financial services company with approximately $3.1 billion in assets under management as of September 30, 2018, and as President, a director and the Chief Investment Officer of Cohen & Company Inc.’s indirect majority owned subsidiary, Cohen & Company Financial Limited (formerly known as EuroDekania Management Limited), a Financial Conduct Authority regulated investment advisor and broker dealer focusing on the European capital markets (“CCFL”). Mr. Cohen served as Vice Chairman of the Board of Directors and of the Board of Managers of Cohen & Company, LLC from September 16, 2013 to February 21, 2018. Mr. Cohen served as the Chief Executive Officer and Chief Investment Officer of Cohen & Company Inc. from December 16, 2009 to September 16, 2013 and as the Chairman of the Board of Directors from October 6, 2006 to September 16, 2013. Mr. Cohen served as the executive Chairman of Cohen & Company Inc. from October 18, 2006 to December 16, 2009. In addition, Mr. Cohen served as the Chairman of the Board of Managers of Cohen & Company, LLC from 2001 to September 16, 2013, as the Chief Investment Officer of Cohen & Company, LLC from October 2008 to September 16, 2013, and as Chief Executive Officer of Cohen & Company, LLC from December 16, 2009 to September 16, 2013. Mr. Cohen served as the Chairman and Chief Executive Officer of J.V.B. Financial Group, LLC (formerly C&Co/PrinceRidge Partners LLC), Cohen & Company Inc.’s indirect broker dealer subsidiary (“JVB”), from July 19, 2012 to September 16, 2013. He has been the Chairman of Bancorp and Chairman of the Executive Committee of Bancorp’s Board of Directors since its inception in 1999. Mr. Cohen is Vice-Chairmanof Bancorp Bank’s Board of Directors and Chairman of its Executive Committee. He had previously been Chairman of Bancorp Bank’s Board of Directors from September 2000 to November 2003 and, from July 2000 to September 2000, had been Bancorp Bank’s Chief Executive Officer. Mr. Cohen has served as the Chief Executive Officer of FinTech III since March 2017. Mr. Cohen served as a director and Chief Executive Officer of FinTech II from May 2015 until July 2018. He previously served as a director of FinTech I from November 2013 until July 2016, as FinTech I’s President and Chief Executive Officer from August 2014 until July 2016, and as FinTech I’s Executive Vice President from July 2014 through August 2014. He previously served as Chief Executive Officer of RAIT from December 2006, when it merged with Taberna Realty Finance Trust, to February 2009, and served as a trustee from the date RAIT acquired Taberna until his resignation from that position in February 2010. Mr. Cohen was Chairman of the Board of Trustees of Taberna Realty Finance Trust from its inception in March 2005 until its December 2006 acquisition by RAIT, and its Chief Executive Officer from March 2005 to December 2006. Mr. Cohen served as a director of Star Asia, a joint venture investing in Asian commercial real estate, from February 2007 to February 2014 and as a director of Muni Funding Company of America, LLC, a company investing in middle-market non-profit organizations, from April 2007 to June 2011. Mr. Cohen is a member of the Academy of the University of Pennsylvania, a member of the Visiting Committees for the Humanities and a member of the Paris Center of the University of Chicago. Mr. Cohen is also a Trustee of the List College Board of the Jewish Theological Seminary, a member of the board of the Columbia Global Center in Paris, a Trustee of the Paideia Institute and a Trustee of the Arete Foundation.
John C. Chrystal, 60
Director
Mr. Chrystal has served as a director of The Bancorp, Inc. and the Bancorp Bank since 2013, and he previously served as Interim Chief Executive Officer of The Bancorp, Inc., and President of the Bancorp Bank, from January 2016 to June 2016. Mr. Chrystal has served as an independent director of MoneyLion, Inc. (a privately held financial wellness and consumer lending platform) since November 2016; an independent director of Regatta Loan Management LLC (a privately held, SEC-registered Investment Adviser) since 2015; and an independent director of the Trust for Advised Portfolios (a mutual fund series trust focused on multiple asset classes) since 2010. Mr. Chrystal was an independent director of Morgan Stanley Derivative Products, Inc. (an entity providing credit enhancement for select derivative transactions) from 2010 to 2017. Mr. Chrystal was an independent director of Javelin Mortgage Investments, Inc. (a mortgage real estate investment trust) from 2012 through its sale in 2016. From 2009 to 2012, Mr.Chrystal was a Managing Member of Bent Gate Advisors, LLC (a firm providing strategic advice to financial institutions); from 2005 through 2008 was the Chief Risk Officer of DiMaio Ahmad Capital (an investment management firm focused on corporate credit markets) and from 1993 to 2005 was a Managing Director with multiple Credit Suisse entities, with oversight of asset management and financial product functions.
Stephanie Gould Rabin, 47
Director
In 2016, Ms. Rabin joined Holborn Corporation, a reinsurance broker, where she served as Head of Corporate Strategy & Senior Vice President until February 2019 and currently serves as a strategic consultant for corporate projects. Ms. Rabin was Senior Vice President and Head of Operations of Aspen US Insurance in 2015, before that, from 2007 to 2015 she was a partner in the M&A/Business Transformation Advisory solutions of Aon plc, a professional services firm. She was also Managing Director at Aon Benfield, where she led the NY and Latin American analytics teams. From 2004 to 2007, Ms. Rabin was Senior Vice President at Guy Carpenter & Co., an insurance and reinsurance company. She earned a B.Sc. in Mathematics and Statistics from McGill University, Montreal and received her M.A. in Industrial-Organizational Psychology from New York University. Ms. Rabin is also an Associate in the Casualty Actuarial Society.
Sasson Posner, 56
Director
Since April 2016, Mr. Posner has been a managing director at Young America Capital, a broker/dealer, and an advisor for Extraordinary Re, a startup (re)insurance risk trading platform. Since December 2017 Mr. Posner served as senior advisor for Teneo Cobbs Allen, a joint venture between Teneo, a global CEO advisory firm, and Cobbs Allen, a risk management firm, providing alternative risk financing services, and insurance advisory and brokerage services to its corporate clients. Prior to that, from February 2012 to February 2016, Mr. Posner was a Managing Director at Deutsche Bank in the Pension & Insurance Risk Markets group, and from March 2006 to February 2012, a Senior VP mostly, with the Structured Sales team. Prior to Deutsche Bank, from 2003 to 2006, Mr. Posner was a Senior VP at Willis Re’s Capital Markets group, the reinsurance division of Willis Group, the predecessor of Willis Towers Watson, an advisory and brokering company. From 1998 to 2000, Mr. Posner was at Lehman Brothers/Lehman Risk Advisors where he was a Senior VP and originated and structured insurance related opportunities for Lehman Re, a Bermudian reinsurer wholly owned by Lehman Brothers. From 1995 to 1998, prior to Lehman Brothers, and upon graduating from the University of Chicago Graduate School of Business, Mr. Posner began his reinsurance career as reinsurance underwriter at Centre Re, a finite reinsurance company.