R&Q denies ‘material breach’ allegation that scuppers 777-Brickell deal

Brickell PC Insurance Holdings, which is backed by  777 Partners, has sensationally moved to terminate its  pending acquisition of Randall & Quilter Investment Holdings (R&Q) citing an alleged “breach of certain obligations under the implementation agreement in relation to the proposed transaction.”

The deal, unveiled in early April this year, valued R&Q at some £482 million, while Brickell was also proposing to invest $100 million of new equity funding into R&Q. Last week, R&Q failed to secure sufficient shareholder support for the deal. A second shareholder meeting and vote was due to take place today (Wednesday, May 25).

But in a statement released this morning (Wednesday, May 25) R&Q said that on the evening of Monday, May 23 it received a letter from Brickell alleging that R&Q is in breach of certain obligations under the implementation agreement in relation to the proposed transaction. “In addition, Brickell claimed that the breach amounts to a material breach by R&Q of the terms of the Implementation Agreement and that Brickell is therefore exercising its right to terminate the Implementation Agreement with immediate effect,” the statement said.

R&Q, in the same statement, denied the allegation. “ R&Q does not agree that it is in breach of the Implementation Agreement as suggested and therefore does not agree that Brickell has a right to terminate the Implementation Agreement,” it said.

“ R&Q has since written to Brickell in such terms. Accordingly, in R&Q’s view the Implementation Agreement, together with Brickell’s obligations in relation to the Acquisition and New Equity Funding remain in full force and effect.”

On the new shareholders meeting due for today, R&Q said, that a further adjournment could give it time to ensure the resolutions that need to be passed to enable the deal to proceed may receive further shareholder support, “potentially sufficient to enable the resolutions to be approved”.

It did, however, stress the current uncertainty of the situation and admitted that even if the resolutions are approved, “given Brickell’s purported termination of the Implementation Agreement, there can be no certainty that Brickell will provide the $100m New Equity Funding or in relation to the Acquisition generally”.

It added: “Shareholders should also note that whilst R&Q may be able to seek to enforce the terms of the Implementation Agreement through the appropriate courts, there can be no certainty that such a claim would succeed or of the timescales for such a claim. In addition, Shareholders should note that, in the absence of an order for specific performance, Brickell’s maximum liability to R&Q under the Implementation Agreement in terms of damages may be $12.5 million.”

Finally, it stated that it will also seek Brickell’s consent to progress a $100 million equity fundraising, with or without its potential partner, so as to cater for R&Q’s funding needs given the potential failure of either the resolutions to be proposed at the SGM or of Brickell’s obligation to provide the $100m new equity funding. “R&Q is of the view that it would be unreasonable for Brickell to withhold such consent.”

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