Bermuda-based AlphaStar Insurance Group Limited reported it has entered into a definitive agreement to sell three subsidiaries to an affiliate of American Insurance Managers Inc. (AIM) of Atlanta, Ga.
The subsidiaries being sold pursuant to the agreement are Realm National Insurance Company (RNIC), a New York-domiciled property-casualty insurer; World Trade Services Inc. (WTS), a managing general agency headquartered in New York; and Stirling Cooke New York Insurance Agency Services Inc., doing business as World Trade Services.
The purchase price, which is subject to potential adjustment, will be based on the GAAP shareholder’s equity of RNIC at December 31, 2002, which will be determined in the near future. The company expects that the ultimate purchase price will be approximately $9,000,000.
AIM or an affiliate has agreed to make two separate down-payments in the form of a loan, the latter no later than May 2, 2003, at which time additional purchase consideration in the form of a letter of credit is to be deposited in an escrow account for the benefit of Stirling Cooke North American Holdings Ltd. (SCNAH), an AlphaStar subsidiary that owns the equity interest in the subsidiaries being sold. Upon receipt of the loan and the letter of credit (which, together with a loan previously made to AlphaStar by an affiliate of AIM, will total approximately 75 percent of the total purchase price) and subject to other conditions precedent, including a capital contribution to RNIC by AIM or its affiliate, RNIC will undertake to write a workers compensation insurance program to be produced by AIM.
The remainder of the purchase price is to be paid into the escrow account subsequent to May 1 pursuant to a formula. The agreement provides that the loan is to be forgiven, and the letter of credit and all subsequent payments of purchase consideration turned over to SCNAH, no later than July 31, 2003.
In October, 2002, AlphaStar and AIM entered into a non-binding letter of intent outlining a similar transaction. Events occurring subsequent to the signing of that letter resulted in disputes between the parties. Pursuant to the agreement being announced herewith, all disputes relating to those events will be resolved upon the initial funding of the purchase price and issuance of coverage, discussed above.
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