Patriot National Inc. (NYSE: PN) has agreed to be acquired by Ebix Inc. (NASDAQ: EBIX) for a combination of cash and stock. The deal values the company at $9.50 a share, a nearly 37% premium over the closing price immediately before the deal was made public. EBIX expects the acquisition of Patriot to immediately boost its earnings.
Patriot National Inc. (NYSE: PN) has complementary assets
The reason Ebix is moving to swallow Patriot National Inc. (NYSE: PN) is that it believes the company’s products and services complement its own. As such, Ebix’s CEO, Robin Raina, said that they hope to create the world’s largest provider of comprehensive insurance software services once they combine the two entities. There was no specific date for when the two companies are expected to have completed the merger.
However, Raina noted that acquiring Patriot will significantly boost the growth potential of Ebix and also pave way for more efficient operation structure thanks to economies of scale. It was worth noting at this juncture that Patriot has been a cost-reduction mode in the recent times, saving more than $0.4 million in 1Q2016.
The management of Ebix also sees strong potential of Patriot National Inc. (NYSE: PN) immediately and substantially boosting earnings of the combined company after the deal closes. But CEO Raina also didn’t specify the amount of EPS boost they expect from Patriot.
But it is important to recall how Patriot performed in 1Q2016. The company generated revenue of $64.6 million, up 50% YoY. Adjusted EPS was $0.21. Patriot’s liquidity was $61.8 million at the end of the latest quarter, an amount made up of cash balance of $11.8 and $10.1 million in revolving credit facility. Patriot had a debt of $136.7 million at the end of the quarter.
Financing the transaction
Ebix will finance the acquisition of Patriot National Inc (NYSE: PN) through both cash and stock. But it was not immediately clear what fraction of the acquisition price will be covered by cash or stock. It was also not immediately clear whether Ebix intended to borrow to fund the acquisition.
However, Ebix said that it would delay its earlier announced stock restructuring plan, perhaps until it closes the acquisition of Patriot.