Fremont, TPG to acquire insurance company

The buyout of Nasdaq-listed Direct General is valued at approximately $628m.

Elara Holdings, an affiliate of San Francisco and Boston-based Fremont Partners and San Francisco-based Texas Pacific Group, has agreed to acquire Nashville, Tennessee-based insurance holding company Direct General in a transaction valued at approximately $628.2 million (€471.3 million) including debt, Direct General said in a statement.

Direct General provides nonstandard personal automobile insurance, term life insurance, premium finance and other related products, the statement said. Its products and services are primarily found in the Southeastern US. The company sells its products and services through a network of 500 neighborhood sales offices.

Shareholders of Direct General stock will receive $21.24 in cash per share of common stock, which is 28.71 percent more than Direct General’s closing price of $16.51 yesterday, the statement said.

The William C. Adair trust is a principal shareholder of Direct General and has made an agreement with Elara to vote in favor of the merger, the statement said. “Stock options of certain key officers and employees of Direct General will be assumed by Elara upon consummation of the transaction,” the statement said. “Under the terms of the transaction, Direct General will cease paying its regular quarterly cash dividends, other than the previously announced dividend to be paid on or before December 15.”

The agreement also includes a termination fee. That part of the arrangement stipulates that Elara must pay the undisclosed fee to Direct General should either party ends the agreement “due solely to a failure to obtain the financing,” the statement.

Founded in 1991, Fremont Partners has more than $2 billion in investments in 22 companies. The firm targets the financial and business services, food and consumer products, healthcare, building products and industrial manufacturing industries. Fremont sold Juno Lighting, a Chicago-based designer, assembler and marketer of recessed and track lighting fixtures in the US and Canada, to Square D, a subsidiary of France’s Schneider Electric, for $610 million in June of 2005.

Fourteen-year-old Texas Pacific Group has more than $30 billion in assets under management and focuses on leveraged buyouts, recapitalizations, spinouts, joint ventures and restructurings. It targets the financial services, technology, industrials, retail and consumer, airline, media and communications and healthcare industries. In conjunction with Cinven, Spectrum Equity Investors and Goldman Sachs, Texas Pacific Group sold Eutelsat, a French satellite operator, to Abertis, a Spanish construction company, for approximately $1.4 billion (€1.07 billion) today.