Brokerlink finds white knight in Allianz

T he battle being waged for control of Calgary-based broker consolidator Canada Brokerlink took a dramatic turn toward the end of last month when Allianz Canada stepped to the table with a superior counter offer worth around $42 million.

The offer of 120c a share put forward by Allianz to Brokerlink’s shareholders is 18% richer than the hostile bid made earlier this year by Equisure Financial Network. The Allianz offer closes on March 21, 2000, with the success of the deal dependent on the insurer gaining at least 66% of Brokerlink’s equity. The offer is conditional on Brokerlink shareholders not approving the previously announced merger with rival Vector Intermediaries. Brokerlink’s directors, who came out in support of the Allianz bid, announced that a special meeting, originally set for February 24, 2000, to vote on the proposed merger with Vector has been shifted to the day after the Allianz bid expires.

The fight for control of Brokerlink erupted earlier this year when Equisure announced intentions to acquire Brokerlink at 102c a share. Equisure also stated that voting rights acquired would be used to counter the marriage with Vector. Brokerlink’s directors then activated a “poison pill” against what it viewed as a hostile bid. This block was later removed when Equisure filed official protest, resulting in The Dominion of Canada General Insurance Company entering the fray and acquiring a 16% holding in Brokerlink. The Dominion’s move was an attempt to protect premium business vested with Brokerlink.

Although a support agreement between Brokerlink and Allianz pledges support of the broker consolidator’s directors to the takeover offer, it does allow them to withdraw their favorable recommendation should a superior unsolicited offer be made.

In a media statement, Allianz says Brokerlink will continue to operate as an independent brokerage, and “placing business with various insurance markets as befits the needs of its customers”. Allianz also revealed that it had entered into a “lock up agreement” with Dominion whereby the latter will tender the 16% stake held in Brokerlink to the bid offer. In return, Dominion has gained assurance of its exiting business with Brokerlink. In an article published in the Globe & Mail, Dominion president George Cooke confirmed that about $33 million in annual premium business held by Brokerlink will be guaranteed for the next three years. In addition to tendering its shares, the Dominion has also agreed to continue providing Brokerlink with $2.1 million in debt financing.

Allianz president Christian Cassebaum describes the deal with Brokerlink as a “strategic growth strategy” in the tenth-ranked insurer’s future plans for the Canadian market. “This acquisition will provide Allianz with a strong investment in the future of the Canadian insurance market. Equisure president George Hutchison confirms that he will not be making a counter offer to Allianz. He sees the Allianz offer as over-valued by 15% to 20%. “At the end of the day we have to apply discipline in valuation. We can’t compete against Allianz, they are buying Brokerlink for different reasons.” Gordon Campbell, president of Vector, expects the Brokerlink/Allianz deal will succeed, thereby scrapping the merger of the two networks. “We’re the bride waiting for the groom at the alter, but it looks like the groom has run off with someone else…but blessings come in many disguises, and Vector still has strong institutional backing with an acquisition fund of $10 million.”