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Australian Consolidated Insurance to tap investors for $10 million after completing Lombard takeover

Thursday 25th February 2010

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Australian Consolidated Insurance will look to tap investors for $10 million once it completes its takeover of Lombard Group.  

The capital raising plans were flagged in Lombard’s notice of a special meeting to vote on the takeover plan. ACIL, which will rebrand Lombard as Insured Group, would make a share placement of 1.1 billion shares at 0.9 cents, a discount of 25% to the 1.2 cents it will pay Lombard investors in its buy-back plan.  

If it doesn’t meet its $10 million target, ACIL will look to top this up with a redeemable convertible preference share issue, that could be extended for another $5 million at the directors’ discretion.  The cash will be used to meet existing payment obligations from ACIL’s previous acquisitions, some of which fall due at the end of next month, and to reduce the insurer’s reliance on its overdraft facility to improve its debt-to-equity ratio.  

Last July, ACIL said it became aware that it might have “contravened one of its borrowing covenants” over its EBITDA ratios, according to the 2009 directors’ report.  NZX this week cleared ACIL’s reverse takeover of Lombard, the vehicle it will use to gain a listing on the New Zealand bourse.

If approved, ACIL shareholders will sell their 42.8 million shares to Lombard, which will then offer some 1.5 billion news shares as consideration for the ACIL shares, or 34.6 Lombard shares for each ACIL stock.  Lombard would make a buy-back offer of about 1.2 cents a share, valuing of the company at $17.7 million.  

In auditor Grant Thornton’s report on ACIL’s accounts for the year to June 30, 2009, it noted a “material uncertainty” over the company’s ability to continue as a going concern.  ACIL’s liabilities exceeded current assets by almost A$5 million last year, and the consolidated entity’s looming shortfall was about A$7.2 million. 

The company’s deferred consideration payments - A$4.2 million for the company and A$6.7 million for the group – are due for settlement next month.  

The ACIL group has 18 subsidiaries in insurance broking, underwriting, risk management and insurance premium funding, including Hamilton-based Classic Cover Insurance, acquired last year, which specialises in insurance for classic cars, bikes and specialist vehicles. 

“The primary objective of the company is to secure capital as a listed entity to continue its business model of earnings, accretive acquisitions, retire debt and build equity for long term capital growth,” the company said in its 2009 financial statements under a note entitled ‘subsequent events’.   

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