Echelon Financial (EFH) has agreed to offload its main operating subsidiary Echelon Insurance to CAA Club Group for C$175m ($132.66m) in an all-cash deal.
Along with Echelon Insurance, the Canadian insurance company will also be selling its unregulated warranty business as part of the deal.
The buyer of the businesses – CAA is made up of two automobile clubs – CAA South Central Ontario and CAA Manitoba, which offer roadside assistance, travel, insurance service and member savings for more than 2.2 million members.
CAA Club Group president and CEO Jay Woo said: “The acquisition of Echelon Insurance represents an exciting opportunity to expand CAA Club Group’s insurance product offering into non-standard auto, property, and commercial insurance.
“CAA is committed to the success of its independent insurance brokers, and is excited to offer them new products to meet their customers’ needs. CAA looks forward to inviting Echelon Insurance’s brokers into one of Canada’s most trusted brands, and supporting them with industry-leading IT systems, support and infrastructure.”
Established in 1998, EFH is engaged in providing property and casualty insurance in Canada through its broker channel. It distributes insurance products through Echelon Insurance and The Insurance Company of Prince Edward Island (ICPEI).
The transaction does not include ICPEI in which EFH will continue to own a 75% stake.
EFH said that its decision to enter into the transaction comes following a strategic review overseen by a committee of its board of directors. The committee looked at various alternatives and recommended that the sale of Echelon Insurance to CAA is in the best interest of the company.
EFH board of directors chairman Murray Wallace said: “We are excited about the sale of Echelon Insurance as it produces an attractive outcome to the shareholders of EFH and the continuation of employment for our staff.
“The success of this transaction can be directly attributed to the vision and commitment of the Echelon Insurance management team and staff who in 2015 implemented a strategy to develop multiple personal and commercial insurance lines of business across the country.”
The closing of the deal will be based on meeting of customary conditions, which include receipt of shareholder approval, insurance regulatory approvals and Competition Act approval.