Alpha Growth PLC (LSE:ALGW, OTCQB:ALPGF) said it is buying Havelet Assignment Company Limited, a Barbados-based financial services company specialising in settlement assignments, in a strategic deal that complements Alpha's Providence Life Assurance Company.
Alpha Growth will pay the seller a nominal sum for the outstanding shares of Havelet and 10% of the net fees generated for a limited time period by the assets under administration.
Havelet currently administers around US$9mln in assigned settlements and generates net profit margins of around 52%. The company is cash flow positive, Alpha Growth said in a statement.
"Havelet is a small but important acquisition for Alpha Growth and one which provides significant additional opportunities to grow AUM [assets under management] within both Havelet and Providence,” commented Gobind Sahney, Alpha's executive chairman.
“As part of our build and buy strategy, we continue to actively progress our acquisition pipeline and will update shareholders on progress when appropriate."
Havelet provides solutions to claimants and attorneys who are awarded settlements through litigation to defer receipt of their settlement on a pre-tax basis. As the settlement obligation is invested on a pre-tax basis and grows on a tax-deferred basis, there is a much larger capital base than if the settlement were received directly by the claimant, taxed, and then invested, Alpha explained.
The net result is the potential for a higher after-tax sum to be received by the claimant, it added.
It said Havelet's clients can customise deferral and payment terms; receive lump sum distributions; and select beneficiaries through annuities purchased and managed by Havelet, typically ranging from 10 to 20 years depending on the age of the claimant and the settlement type.
These annuities will be capable of being issued by Alpha’s Providence business, thereby increasing the cross-selling opportunities across the Alpha group of companies. The annuities aim to provide a long-term independent stream of revenue for both Havelet and Providence, Alpha said.
It added that it plans to increase the marketing of Havelet's solutions to its established clientele and broader legal community in the US with a view to materially increasing the assets under management.
Jason Sutherland, a non-executive director at Alpha, said: "I have been in the annuity sector for over 20 years and [am] very familiar with the settlement assignment business. It's a consistently growing field given the amount of civil litigation in the US and awarding of large claims.
“Havelet is an ideal acquisition for Alpha as it will generate service fees on its own level and opens a channel for Providence to issue annuities and grow its fee-based assets under administration."
The acquisition is expected to be completed by 30 November 2022.