Item 8.01. Other Events
As previously disclosed, on July 7, 2020, National General Holdings Corp., a
Delaware corporation (the "Company"), The Allstate Corporation, a Delaware
corporation ("Parent"), and Bluebird Acquisition Corp, a Delaware corporation
and an indirect wholly owned subsidiary of Parent ("Merger Sub"), entered into
an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which
Merger Sub will be merged with and into the Company (the "Merger"), with the
Company surviving the Merger as a wholly owned subsidiary of Parent. The
transaction is expected to close in early 2021, subject to regulatory approvals
and other customary closing conditions. On August 26, 2020, the Company filed
and commenced mailing its definitive proxy statement on Schedule 14A (the "Proxy
Statement").
Stockholder Litigation
In connection with the Merger Agreement and the transactions contemplated
thereby, a purported class action complaint and two individual complaints have
been filed by purported stockholders of the Company against the Company and
members of the board of directors of the Company in the United States District
Courts for the District of Delaware and the Southern District of New York. The
three complaints are captioned as follows: Post v. National General Holdings
Corp., et al, Case 1:20-cv-01069 (D. Del), Murray v. National General Holdings
Corp., et al., Case 1:20-cv-06549 (S.D.N.Y) and Wang v. National General
Holdings Corp., et al., Case:120-cv-06867 (S.D.N.Y.). The complaints are
substantially identical and allege violations of Section 14(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14a-9
promulgated thereunder, as well as, in the case of the individual defendants,
the control person provisions of the Exchange Act, because the Proxy Statement
allegedly omitted material information with respect to the Merger, thus
rendering the Proxy Statement false and misleading. The complaints seek to
enjoin the defendants from proceeding with the Merger, rescission of the Merger
or rescissory damages if the Merger is consummated, a declaration that the
defendants violated Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9,
and awards of the plaintiffs' costs of the action, including attorneys' and
experts' fees.
Supplemental Disclosures
The Company believes that no further disclosure is required to supplement the
Proxy Statement under applicable laws; however, to avoid the risk that the
litigations described above may delay or otherwise adversely affect the
consummation of the Merger and to minimize the expense of defending such
actions, the Company wishes to voluntarily make supplemental disclosures related
to the Merger, all of which are set forth below, in response to certain of the
allegations raised in the lawsuits described above. Nothing in this Current
Report on Form 8-K shall be deemed an admission of the legal necessity or
materiality of the disclosures set forth herein. To the contrary, the Company
specifically denies all allegations in the lawsuits described above that any
additional disclosure was or is required. The information contained in this
Current Report on Form 8-K is incorporated by reference into the Proxy
Statement. To the extent that information in this Current Report on Form 8-K
differs from or updates information contained in the Proxy Statement, the
information in this Current Report on Form 8-K shall supersede or supplement the
information in the Proxy Statement.
The following information should be read in conjunction with the Proxy
Statement. All page references in the information below are to pages in the
Proxy Statement, and capitalized terms used in this Current Report on Form 8-K
shall have the meanings set forth in the Proxy Statement, unless otherwise
defined herein. Unless stated otherwise, new text is bolded and underlined to
highlight the supplemental information being provided to you.
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(1) Supplements to "Proposal 1: The Merger-Opinion of J.P. Morgan Securities
LLC-Dividend Discount Analysis"
The following disclosures amend and supplement the existing disclosures
contained under the heading "Proposal 1: The Merger-Opinion of J.P. Morgan
Securities LLC-Dividend Discount Analysis" on page 58 of the Proxy Statement as
follows:
J.P. Morgan conducted a dividend discount analysis to determine a range of
equity values for the Common Stock based on 117.0 million fully diluted shares
of Common Stock outstanding (as provided by the Company's management on July 6,
2020), assuming the Company continued to operate as a standalone entity. The
range, which was approximately $3.70 billion to approximately $4.60 billion, was
determined by adding the present value of an estimated future dividend stream
for the Company over a five-year period from 2020 through 2024, using the
Company Projections and the present value of an estimated terminal value of the
shares at the end of 2024. A dividend discount model is a quantitative method of
valuing a company's share price based on the assumption that the company's
current equity value equals the sum of all of the company's potential future
dividends discounted back to their present value. For purposes of a dividend
discount model analysis, the calculation of the company's future dividends is
based on estimates of the amount of cash available to be paid as dividends and
the timing of those payments, without regard to whether the company's management
actually projects that the company will pay those dividends at those times. The
Company's management directed J.P. Morgan to use estimated annual dividend
amounts for the Company of $182 million, $141 million, $129 million,
$284 million and $374 million for 2020, 2021, 2022, 2023 and 2024, respectively,
based on Company's management's view of the minimum capital required to operate
the business in subsequent years. The Company may and would only pay dividends
when, as and if declared by the Company's board of directors out of funds
legally available for that purpose and any such declaration is subject to other
regulatory restrictions. If the Merger is consummated, the surviving company
will be subject to similar restrictions on the declaration of dividends. J.P.
Morgan used the perpetuity growth method to calculate a terminal growth rate of
1.50% - 2.50% (among other terminal year assumptions) based on Company
management's guidance and J.P. Morgan's experience and judgment. In performing
its analysis, J.P. Morgan assumed a cost of equity range of 10.75% - 11.75%,
which range was chosen by J.P. Morgan taking into account macroeconomic
assumptions, estimates of risk, the Company's capital structure and other
factors that J.P. Morgan considered to be appropriate in its professional
judgment.
(2) Supplements to "Proposal 1: The Merger-Opinion of J.P. Morgan Securities
LLC-Other Information"
The following disclosures amend and supplement the existing disclosures
contained under the heading "Proposal 1: The Merger-Opinion of J.P. Morgan
Securities LLC-Other Information" on page 58 of the Proxy Statement as follows:
Analysts Price Targets. J.P. Morgan reviewed the price targets of public equity
research analysts for the Company obtained from FactSet Research Systems. J.P.
Morgan noted that such price targets per share of Common Stock, as of July 6,
2020 were as follows:
Price Target
Broker 1 $ 18.00
Broker 2 $ 26.00
Broker 3 $ 29.00
Broker 4 $ 30.00
J.P. Morgan noted a median price target of $27.50 per share of Common Stock, as
of July 6, 2020, and compared that to (i) the closing price of the Common Stock
on the last undisturbed trading day prior to the announcement of the Merger and
(ii) the Total Consideration.
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(3) Supplements to "Proposal 1: The Merger-Opinion of J.P. Morgan Securities
LLC-Miscellaneous"
The following disclosures amend and supplement the existing disclosures
contained under the heading "Proposal 1: The Merger-Opinion of J.P. Morgan
Securities LLC-Miscellaneous" on page 59 of the Proxy Statement as follows:
J.P. Morgan received a fee from the Company of $3 million in connection with the
delivery of its opinion. The Company has agreed to pay J.P. Morgan a transaction
fee that is estimated, based on the information available as of the date of
announcement, to be up to approximately $34 million, against which the opinion
fee will be credited, upon the consummation of the transaction. In addition, the
Company has agreed to reimburse J.P. Morgan for its expenses incurred in
connection with its services, including the fees and disbursements of counsel,
and will indemnify J.P. Morgan against certain liabilities arising out of J.P.
Morgan's engagement. During the two years preceding the date of J.P. Morgan's
opinion, J.P. Morgan and its affiliates have had, and continue to have,
commercial or investment banking relationships with the Company and Allstate,
and are currently providing corporate advisory services to Allstate unrelated to
the Merger, for which J.P. Morgan and such affiliates have received, or will
receive, customary compensation. Such services during such period have included
acting as joint lead arranger and bookrunner on the Company's credit facility
which closed in February 2019, joint lead bookrunner on the Company's offering
of equity securities which closed in November 2018 and as joint bookrunner on
Allstate's offerings of preferred stock and debt securities which closed in
November, August and June 2019, respectively. In addition, J.P. Morgan's
commercial banking affiliate is an agent bank and a lender under outstanding
credit facilities of the Company and Allstate, for which it receives customary
compensation or other financial benefits. In addition, J.P. Morgan and its
affiliates hold, on a proprietary basis, less than 1% of the outstanding common
stock of each of the Company and Allstate. During the two year period preceding
the delivery of its opinion, the aggregate fees received by J.P. Morgan from the
Company were approximately $5.1 million and the aggregate fees received by J.P.
Morgan from Allstate, including compensation received by J.P. Morgan's
commercial banking affiliate from Allstate, were approximately $16.5 million. In
the ordinary course of their businesses, J.P. Morgan and its affiliates may
actively trade the debt and equity securities or financial instruments
(including derivatives, bank loans or other obligations) of the Company or
Allstate for their own accounts or for the accounts of customers and,
accordingly, they may at any time hold long or short positions in such
securities or financial instruments.
Additional Information and Where to Find It
This filing may be deemed solicitation material in respect of the proposed
acquisition of the Company by Parent. In connection with the Merger, the Company
has filed with the Securities and Exchange Commission and furnished to its
stockholders the Proxy Statement. Additionally, the Company will file other
relevant materials with the Securities and Exchange Commission in connection
with the proposed transaction.
The materials filed or to be filed by the Company with the Securities and
Exchange Commission may be obtained free of charge at the Securities and
Exchange Commission's web site at www.sec.gov. In addition, stockholders also
may obtain free copies of the Proxy Statement from the Company by contacting
National General Holdings Corp. Investor Relations at 59 Maiden Lane, 38th Floor
New York, New York 10038, telephone number (212) 380-9462 or
InvestorRelations@ngic.com. INVESTORS AND STOCKHOLDERS OF THE COMPANY ARE URGED
TO READ THE PROXY STATEMENT AND THE OTHER RELEVANT MATERIALS WHEN THEY BECOME
AVAILABLE BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE
PROPOSED MERGER BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER
AND THE PARTIES TO THE MERGER.
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Participants in the Solicitation
The Company and its directors, executive officers and other members of
management and employees, under the Securities and Exchange Commission rules,
may be deemed to be participants in the solicitation of proxies of the Company's
stockholders in connection with the proposed Merger. Investors and security
holders may obtain more detailed information regarding the names, affiliations
and interests of certain of the Company's executive officers and directors in
the solicitation by reading the Company's proxy statement for its 2020 annual
meeting of stockholders and the Proxy Statement and other relevant materials
which may be filed with the Securities and Exchange Commission in connection
with the Merger when and if they become available. Information concerning the
interests of the Company's participants in the solicitation, which may, in some
cases, be different than those of the Company's stockholders generally, are set
forth in the Proxy Statement. Additional information regarding the Company's
executive officers and directors in the solicitation is available by reading the
Company's proxy statement for its 2020 annual meeting of stockholders.
Forward Looking Statements
This current report on Form 8-K contains "forward-looking statements" that are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The forward-looking statements are based on the Company's
current expectations and beliefs concerning future developments and their
potential effects on the Company. Forward-looking statements can generally be
identified by the use of forward-looking terminology, such as "may," "will,"
"plan," "expect," "project," "intend," "estimate," "anticipate" and "believe" or
their variations or similar terminology. There can be no assurance that actual
developments will be those anticipated by the Company. Actual results may differ
materially from those expressed or implied in these statements as a result of
significant risks and uncertainties, including, but not limited to, the
possibility that competing offers will be made, the occurrence of any event,
change or other circumstances that could give rise to the termination of the
Merger Agreement, the inability to complete the proposed Merger due to the
failure to obtain stockholder approval for the proposed Merger or the failure to
satisfy other conditions to completion of the proposed Merger, non-receipt of
expected payments from insureds or reinsurers, changes in interest rates, a
downgrade in the financial strength ratings of our insurance subsidiaries, the
potential effect of changes in LIBOR reporting practices, the effects of
pandemics or other widespread health problems such as the ongoing COVID-19
pandemic on our business, the effect of the performance of financial markets on
our investment portfolio, our ability to accurately underwrite and price our
products and to maintain and establish accurate loss reserves, estimates of the
fair value of investments, development of claims and the effect on loss
reserves, large loss activity including hurricanes and wildfires, the cost and
availability of reinsurance coverage, the effects of emerging claim and coverage
issues, the effect of unpredictable catastrophic losses, changes in the demand
for our products, our degree of success in integrating acquired businesses, the
effect of general economic conditions, state and federal legislation, the
effects of tax reform, regulations and regulatory investigations into industry
practices, risks associated with conducting business outside the United States,
developments relating to existing agreements, disruptions to our business
relationships with third party vendors or agencies, breaches in data security or
other disruptions involving our technology, heightened competition, changes in
pricing environments, and changes in asset valuations. The forward-looking
statements contained in this current report on Form 8-K are made only as of the
date of this current report on Form 8-K. The Company undertakes no obligation to
publicly update any forward-looking statement except as may be required by law.
Additional information about these risks and uncertainties, as well as others
that may cause actual results to differ materially from those projected is
contained in the Company's filings with the Securities and Exchange Commission.
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