Proposed placing of 39,995,997 new ordinary shares in connection with the recommended all-share merger between Partnership Assurance Group plc and Just Retirement Group plc | Cinven

Partnership Assurance Group plc (“Partnership Assurance” or the “Company”) today announces a proposed underwritten placing of 39,995,997 new ordinary shares of 10 pence each in the capital of the Company (“Ordinary Shares“), (together, the “Placing Shares“) representing approximately 9.99% of the Company’s current issued ordinary share capital (the “Placing“).

The Placing is being undertaken in conjunction with the recommended all-share merger (the “Merger“) between Partnership Assurance and Just Retirement Group plc (“Just Retirement“) to create JRP Group plc (the “Combined Group“), which was announced on 11 August 2015 (the “Merger Announcement“).
Separately today, Just Retirement has announced a proposed fully underwritten placing and open offer (the “Just Retirement Placing and Open Offer“)
It is intended that the two equity capital raisings will raise, in aggregate, net proceeds of approximately £150 million, consistent with the intention communicated by Partnership Assurance and Just Retirement in the Merger Announcement. The net proceeds of the two equity capital raisings will allow the Combined Group to:
- cover expected non-recurring integration costs of approximately £60 million and transaction costs of approximately £20 million;
- provide further comfort over the transition to Solvency II; and
- support future growth initiatives and product development.
The Cinven Funds, which together hold approximately 51.9 per cent. of Partnership Assurance Shares, are supportive of the Placing and intend to participate in the Placing.
The Placing is not conditional on the completion of the Merger or the Just Retirement Placing and Open Offer.

Overview of the merger

The Boards of Just Retirement and Partnership Assurance announced that they had reached agreement on the terms ofa recommended all-share merger to create JRP Group plc on 11 August 2015.
Under the terms of the Merger, Partnership Assurance Shareholders will be entitled to receive 0.834 New Just Retirement Shares for each Partnership Assurance Share held.
The Merger is expected to result in Just Retirement Shareholders owning approximately 60 per cent. of the Combined Group and Partnership Assurance Shareholders owning approximately 40 per cent. of the Combined Group.
The Boards of Just Retirement and Partnership Assurance believe that the Merger will deliver significant strategic and financial benefits for the Combined Group:

Strategic benefits

Scale to grow in attractive segments. The Combined Group’s larger capital base will enable a broader defined benefit proposition and enhance the Combined Group’s perceived strength of covenant, opening up opportunities in the attractive defined benefit scheme de-risking segment.
Consumer champion. The Merger will strengthen the competitive position of the Combined Group in the UK retirement income market, expected to lead to improved customer outcomes compared to the products currently offered by larger incumbent insurers.
Accelerate new product launches. Combining the specialist management teams and expertise of Just Retirement and Partnership Assurance will also enhance the Combined Group’s ability to develop and accelerate new product launches in the evolving retirement income market. This is of critical importance given the greater expectation of new products among customers following the freedom and choice introduced by the 2014 pension reforms.
Outstanding intellectual property. The combination of Just Retirement and Partnership Assurance’s mortality datasets and underwriting expertise will facilitate improved risk selection and greater reserving accuracy, leading to better value solutions for customers across the entire product range.
More efficient distribution. In both the UK defined benefit de-risking segment and retirement income market, the streamlining of sales functions will lead to a more efficient distribution model for the Combined Group. Overseas expansion will be facilitated through combined international expertise.

Financial benefits

Synergy potential. The combination of the two businesses is expected to create the potential for significant synergies supporting meaningful EPS accretion for Just Retirement Shareholders and Partnership Assurance Shareholders on a fully phased basis.[1] The Just Retirement Board expects the Merger to result in pre-tax cost savings of at least £40 million per annum. These synergies are expected to be implemented following completion of the Merger with the full run-rate being achieved in 2018 (the third year following completion) and are expected to require one-off integration costs of £60 million over two years[2]. The Just Retirement Directors also expect these synergies to have a positive impact on embedded value, new business margin, economic capital and Solvency II capital ratios over time.

High quality cash generation. The Combined Group will have stronger combined capacity for cash generation, supported by Partnership Assurance’s more developed back book and improved operational efficiencies delivered from the combined operating platform, supporting growth and dividend capacity.Enhanced capital position. The Combined Group’s stronger capital position will be enhanced through the two equity capital raisings announced today of approximately £150 million, providing the financial flexibility to pursue future growth initiatives and product development.

The Combined Group intends to use its outstanding combined intellectual property and greater scale to accelerate the existing strategies of Just Retirement and Partnership Assurance, allowing the business to sustain its position in the rapidly developing retirement income market, generating improved outcomes for customers and strong returns for investors:
- The Combined Group will seek to build upon the considerable progress made by Just Retirement and Partnership Assurance since 2013 in the defined benefit de-risking segment, capitalising on its enhanced size and financial strength to compete successfully for larger opportunities using an individually underwritten approach based on medical and/or lifestyle factors, as well as existing segments.
- In the UK retirement income market, the Combined Group will seek to utilise its improved scale, efficiency and capital strength to continue providing customers with better value alternatives to products offered by larger incumbent insurers.
- The Combined Group will look to strengthen its position in the broader retirement income space fundamentally affected by regulatory change, acting as a disruptor to the larger incumbent insurers whilst continually innovating and developing new products.
- Finally the Combined Group will build upon the foundations laid by both companies to offer their attractive products in new geographies.

Equity capital raisings and use of proceeds

The proceeds of the two equity capital raisings will allow the Combined Group to cover expected non-recurring integration and transaction costs, provide further comfort over the transition to Solvency II, and support future growth initiatives and product development.
In line with Just Retirement’spreviously stated strategy, the Combined Group will explore, on an on-going basis, a range of balance sheet options (including accessing the debt capital markets) with a view to providing further financial strength and supporting future growth.
Whilst the formal change in control applications have now been made to the PRA and FCA, pre-notification discussions have already taken place with both the PRA and FCA with respect to the Merger and the capital position of the Combined Group.
In the event the Merger does not complete, the Partnership Assurance Board will consider the best uses for the net proceeds, including accelerating its own standalone growth initiatives and providing further comfort over the transition to Solvency II.

Current trading

Partnership Assurance announced its unaudited interim results for the six months ended 30 June 2015 on 11 August 2015. Current trading remains in line with the statements made in Partnership Assurance’s interim results announcement. Whilst it is too early to be certain, based on current activity levels, individual annuity volumes are expected to grow in H2 15 relative to H2 14 and H1 15. In defined benefit annuities, completions remain lumpy, but recent activity and the current pipeline for new business provides confidence in the achievement of a targeted level of at least £200m of new business premiums in 2015. As individual annuity volumes increase and the targeted defined benefit sales are delivered, both the absolute level of new business profits and the new business margins are expected to recover.
On 17 September 2015, Just Retirement announced its preliminary results for the year ended 30 June 2015.

Details of the Placing

J.P. Morgan Securities plc, which carries on its investment banking activities under the name J.P. Morgan Cazenove (“J.P. Morgan Cazenove” or “JPMC“), and Morgan Stanley & Co, International plc (“Morgan Stanley“) will commence a bookbuilding process in respect of the Placing (the “Bookbuild” or the “Bookbuilding Process“). The Bookbuild will open with immediate effect following this Announcement.
JPMC and Morgan Stanley have entered into an agreement with Partnership Assurance (the “Placing Agreement“) under which, subject to the conditions set out therein, each of JPMC and Morgan Stanley has agreed to use its reasonable endeavours to procure subscribers for the Placing Shares at a price to be determined following completion of the Bookbuild as set out in the Placing Agreement.
The Placing is being underwritten by JPMC and Morgan Stanley and is subject to the terms and conditions of the Placing Agreement and the terms and conditions set out in the appendix to this Announcement (the “Appendix“). Members of the public are not entitled to participate in the Placing.
The Placing Shares will, when issued, be credited as fully paid and rank pari passu in all respects with the existing issued Ordinary Shares. This includes the right to receive all dividends and other distributions declared or paid in respect of such Ordinary Shares after the date of issue of the Placing Shares. However, the Placing Shares will not be entitled to the interim dividend of 0.5 pence per Ordinary Share for the six months ended 30 June 2015, as the existing shares of Partnership Assurance went ex-dividend on 20 August 2015.
The price per Ordinary Share at which the Placing Shares are to be placed (the “Placing Price“) will be determined at the close of the Bookbuild. Details of the Placing Price will be announced as soon as practicable after the closing of the Bookbuild. The timing of the pricing and allocations are at the discretion of JPMC, Morgan Stanley and Partnership Assurance. The timing of the close of the Bookbuild is at the discretion of JPMC and Morgan Stanley.
Application will be made for the Placing Shares to be admitted to the premium listing segment of the Official List of the Financial Conduct Authority (the “FCA”) and to trading on the main market for listed securities of London Stock Exchange plc (the “London Stock Exchange” and together, “Admission“). It is expected that Admission will take place at 8.00 a.m. (London time) on 29 September 2015 (or such later date as JPMC and Morgan Stanley may agree with the Company).
The Placing is conditional upon, inter alia, Admission becoming effective and the Placing Agreement not being terminated in accordance with its terms. The Placing is not conditional on the Merger or on the Just Retirement Placing and Open Offer.
This Announcement should be read in its entirety. In particular, your attention is drawn to the “Important Notices” section of this Announcement, to the detailed terms and conditions of the Placing contained in the Appendix and further information relating to the Bookbuild described in the Appendix to this Announcement (which forms part of this Announcement).
By choosing to participate in the Placing and by making an oral and legally binding offer to acquire Placing Shares, investors will be deemed to have read and understood this Announcement in its entirety (including the Appendix) and to be making such offer on the terms and subject to the conditions of the Placing contained herein, and to be providing the representations, warranties and acknowledgements contained in the Appendix.
J.P. Morgan Cazenove is acting as the Sole Global Coordinator and, together with Morgan Stanley, is acting as Joint Bookrunner, in connection with the Placing.
It should be noted that each Capital Raise has its own separate terms and conditions and termination rights. In particular the Placing is not conditional on completion of the Just Retirement Placing and Open Offer. As such, you should be aware that the Placing may complete in circumstances where the Just Retirement Placing and Open Offer does not complete. You should also note that the Placing is not conditional on completion of the Merger so the Placing may complete but the Merger may subsequently not do so.

Other details on the Merger

Conditions and timetable

The Mergerissubjecttothesatisfactionorwaiverof the CMA Pre-Condition set out in Appendix I to the Merger Announcement, theConditionsand thefurther termssetoutinAppendixIItothe Merger Announcementand to the full terms and conditions whichwillbesetoutintheScheme Document, which include, inter alia (i) the Scheme becoming effective no later than the Long Stop Date; (ii)approval by the requisite majority of Just Retirement Shareholders at the Just Retirement General Meeting and (iii)regulatory clearances being received from the PRA, the FCA and (to the extent the CMA Pre-Condition is waived) the CMA, all as further described in Appendix II to the Merger Announcement.
In order to become Effective, the Scheme must be approved by a majority in number representing not less than 75 per cent. in value of Partnership Assurance Shareholders present and voting either in person or by proxy at the Court Meeting.
It is expected that the Scheme Document will be despatched to Partnership Assurance Shareholders in October 2015 provided the CMA Pre-Condition has been satisfied by that time (and the Scheme Document will be despatched in any event by 1 February 2016, unless Just Retirement and Partnership Assurance together agree a later date). TheScheme Document will include full details of the Scheme and contain notices of the Court Meetingand the Partnership Assurance General Meeting and the expected timetable.
The Just Retirement Shareholder Circular, containing details of the Merger and notice for the Just Retirement General Meeting, will also be posted to Just Retirement Shareholders at the same time as the Scheme Document is posted to Partnership Assurance Shareholders, with the Just Retirement General Meeting being held at or around the same time as the Partnership Assurance Meetings.
Subject to approval by the FCA, a prospectus setting out further details of the Just Retirement Placing and Open Offer (including certain risk factors) is expected to be published by Just Retirement on or about 28 September 2015 (the “Prospectus“).
The Scheme is expected to become Effective in December 2015, subject to the satisfaction or waiver of the CMA Pre-Condition set out in Appendix I to the Merger Announcement and the Conditions and certain further terms set out in AppendixII to the Merger Announcement.
For further details on the Merger are contained in the Merger Announcement.

Irrevocable undertakings

Avallux S.à r.l. (a company wholly owned by Permira IV Fund), which holds approximately 52.3 per cent. of Just Retirement Shares, and the Cinven Funds, which are managed by Cinven and which together hold approximately 51.9 per cent. of Partnership Assurance Shares, on the Last Practicable Date are both fully supportive of the Merger and have provided irrevocable undertakings to vote in favour of the Merger at the Just Retirement General Meeting and the Partnership Assurance General Meeting, respectively, and, in the case of the Cinven Funds, the Court Meeting.
Just Retirement and Partnership Assurance have received irrevocable undertakings to vote in favour of the Scheme at the Court Meeting and the resolutions relating to the Merger to be proposed at the Partnership Assurance General Meeting in respect of 224,454,091 Partnership Assurance Shares in aggregate, representing approximately 56.1 per cent. of the issued ordinary share capital of Partnership Assuranceon the Last Practicable Date.
Just Retirement and Partnership Assurance have received irrevocable undertakings to vote in favour of the Just Retirement Resolutions to be proposed at the Just Retirement General Meeting in respect of 267,428,148 Just Retirement Shares in aggregate, representing approximately 53.4 per cent. of the issued ordinary share capital of Just Retirementon the Last Practicable Date.
Further details on the irrevocable undertakings are contained in Section 5 of the Merger Announcement.

Lock-up Agreement

On 11 August 2015, Avallux, the Cinven Funds and Barclays entered into a lock-up agreement (the “Lock-up Agreement“) pursuant to which Avallux and the Cinven Funds each agreed that they will not, without Barclays’ consent, dispose of any Just Retirement Shares at any time during the lock-up period (subject to certain customary carve-outs). The Lock-up Agreement is conditional upon and shall come into force upon the Effective Date, and the lock-up period continues until the later of (i) 30 calendar days following the Effective Date and (ii) 90 calendar days following admission of the shares issued pursuant to the Capital Raise (provided that admission is not later than 30 days following the Effective Date). For the purposes of the merger, the Effective date refers to the date on which: the Scheme becomes effective in accordance with its terms; or if Just Retirement elects to implement the Merger by way of a Takeover Offer, the date the Merger becomes or is declared unconditional in all respects.

Sell-down Agreement

On 11 August 2015, Avallux and the Cinven Funds entered into a sell down agreement (the “Sell-down Agreement“) pursuant to which Avallux and the Cinven Funds each agreed that that they will not dispose of any Just Retirement Shares without first offering each other the right to elect to participate in the proposed disposal at the same price and on the same terms and conditions, in the respective ratio 60:40. The Sell-down Agreement is conditional upon and shall come into force upon the Effective Date. The Sell-down Agreement terminates if either Avallux or the Cinven Funds cease to hold or control, in aggregate, five per cent. or more of the Just Retirement Shares or votes able to be cast at general meetings of Just Retirement.