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Insurance Acquisition Corp. (INSU) to Combine with Shift Technologies

June 29, 2020 7:50 AM EDT

Shift Technologies Inc. ("Shift"), an e-commerce platform on a mission to make car-buying convenient, fair, and accessible for everyone, and Insurance Acquisition Corp. (Nasdaq: INSU), a publicly traded special purpose acquisition company, today announced they have entered into a definitive merger agreement whereby Shift will combine with Insurance Acquisition Corp. In connection with the closing of the transaction, Insurance Acquisition Corp. intends to change its name to Shift Technologies, Inc. and remain NASDAQ-listed under a new ticker symbol. The transaction is expected to close in the third quarter of 2020.

Daniel Cohen, Chairman of the Board of Directors of Insurance Acquisition Corp., commented, "We are excited to partner with Shift and its world-class management team as it leverages its technology platform to disrupt the $840+ billion used car market. With its tremendous, ongoing success in its core markets, we believe that this merger and its accompanying capital infusion will enable Shift to expand its product offerings and execute on its growth strategies."

George Arison, Shift Co-CEO, said, "Shift's mission is to make car purchase and ownership simple. Merging with Insurance Acquisition Corp. is the next step in our evolution and will enhance our ability to scale our operations as we continue to deliver one of the industry's broadest selections of used cars via our powerful technology platform. We look forward to partnering in a transaction that provides an efficient path for a successful transformation to a public company."

Toby Russell, Shift Co-CEO added, "Our high net promoter score demonstrates our success in delivering a simple, satisfying car buying experience for consumers, and our strong market penetration in our core markets demonstrates our ability to effectively scale the business. We operate in a massive market and we believe that there is a significant opportunity to continue to rapidly grow our business. We are actively pursuing our growth initiatives as we execute on our vision."

Following the close of the transaction, Shift's highly experienced management team will continue to operate the combined company.

Shift Highlights

Shift has built a leading automotive e-commerce company powered by a unique technology platform that delivers a comprehensive and seamless car ownership experience. Shift allows its customers to buy, sell and finance cars in a simple, quick and enjoyable process. Combining both a "buy it now" option for customers to purchase a vehicle sight unseen with its unique concierge service, that allows customers to request a test drive at their home or work, as well as proprietary point-of-sale software, Shift enables the discovery, test drive, purchase and financing of pre-owned vehicles to consumers without visiting a physical place of business. Leveraging its five regional reconditioning centers and highly efficient consumer purchasing offering, Shift is able to address the entire spectrum of used cars, regardless of sales price, and do so with compelling unit economics.

Additional areas where Shift is focused, as it builds a leading automotive e-commerce platform to the sale, purchase and financing of used cars, include:

  • Shift's differentiated strategy focuses on the largest segments of the highly-fragmented used car market, offering one of the broadest spectrums of used car inventory, including Value segment offerings.
  • Shift is the only automotive e-commerce platform to leverage a patented system and method for managing on-demand test drives.
  • By targeting urban, densely populated markets, Shift has used machine learning and a "speed to lead" sales approach to grow its market penetration to over 4% in its top-performing cities within the San Francisco market. With current operations in five markets, which together account for 8% of the U.S. population, Shift has a significant runway for continued expansion.
  • 6.1% gross margin in 2019 demonstrates strong unit economics driven by high-margin vehicle acquisition channels, optimized inventory mix and ancillary product offerings, combined with streamlined inventory onboarding, low fulfillment and reconditioning costs, and centralized software.
    • 90%+ of Shift's inventory is sourced from consumers and partners, driving industry leading margins and low customer acquisition cost.
    • Data-driven vehicle evaluations ensure acquisition of the right inventory at the right time reducing days to sale.

Additional information about Shift's operations can be found at www.shift.com. In addition, information about Shift's operations and financial performance is contained in the investor presentation (the "Investor Presentation") furnished today by Insurance Acquisition Corp. via a Current Report on Form 8-K with the Securities and Exchange Commission (the "SEC"), which can be viewed at the SEC website at www.sec.gov.

Transaction Overview

Insurance Acquisition Corp. will combine with Shift for aggregate consideration of approximately $380 million in Insurance Acquisition Corp. Class A common stock, plus an additional 6 million shares of Class A common stock that will be earned if the combined company achieves certain price targets over time. In connection with the transaction, institutional investors, including Fidelity Management & Research Company, LLC, and ArrowMark Partners, have committed to a $185 million private purchase of Insurance Acquisition Corp. Class A common stock that will close concurrently with the business combination. Insurance Acquisition Corp. has committed to register these private shares shortly following the closing of the combination. The combined company will retain up to $300 million of cash following the transaction, which will be used to support working capital and fund growth.

The boards of directors of both Insurance Acquisition Corp. and Shift unanimously approved the transaction. The proposed transaction is expected to be completed in the third quarter of 2020, pending stockholder approval of both Insurance Acquisition Corp. and Shift, and is subject to customary regulatory and other closing conditions.

Advisors

Wells Fargo is acting as exclusive financial advisor to Shift and the Sole Placement Agent to Insurance Acquisition Corp. Cantor Fitzgerald, Wells Fargo, William Blair and Northland Capital Markets are acting jointly as Capital Markets Advisors. Jenner & Block is acting as legal advisor to Shift. Morgan, Lewis & Bockius is acting as legal advisor to Insurance Acquisition Corp. The Blueshirt Group is acting as investor relations and public relations advisor to Shift. Latham & Watkins is acting counsel to the Placement Agent for this transaction. O'Melveny & Myers is acting as counsel to Shift's stockholders.

Investor Conference Call

Today, June 29, 2020 at 8:00 a.m. ET, Shift and Insurance Acquisition Corp. will host a joint investor conference call to discuss the proposed transaction and review an investor presentation, which will be filed with the SEC as an exhibit to a Current Report on Form 8-K prior to the call, available on the SEC website at www.sec.gov.

To listen to the prepared remarks, dial 888-203-1112, passcode: 8051299 through end of day on July 3, 2020. A transcript of the call will also be made available on the SEC website at www.SEC.gov.



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