Tower Group has entered into a stock purchase agreement to acquire North American Lumber Insurance Company, a shell company with 17 US state licenses. Tower will pay $1.05 million in cash at closing.
An additional $75,000 will be paid within one year of the closing date, contingent upon license reactivation in Pennsylvania and Maine.
North American Lumber Insurance Company (NALIC) will be initially capitalized with part of the $26 million raised by Tower Group through two trust preferred offerings in December 2004.
According to the terms of the agreement, all liabilities and assets of NALIC (which will be renamed) will be transferred to a liquidating trust prior to closing with the exception of its charter and insurance licenses. The transaction is subject to court approval in Massachusetts and is expected to close in the first quarter of 2005.
Michael Lee, president and CEO of Tower stated: This acquisition will allow us to continue executing our plan to expand territorially. We plan to promptly begin offering policies in New Jersey after the close of the transaction, followed by expansion into other states. We also expect to make similar shell acquisitions in the future in order to offer products in various market segments in the same territory.