TRAVERSE CITY — Specialty auto insurer Hagerty Group LLC will combine with special purpose acquisition company Aldel Financial Inc. in a $3 billion deal that would make Hagerty a publicly traded company once the merger closes.
Hagerty insures more than 2 million classic and enthusiast vehicles globally. The company has generated a 25 percent compound annual revenue growth rate in the last three years and has a 90 percent customer retention rate.
An investor presentation on the deal estimates that Hagerty’s annual insurance and membership revenue will grow from a projected $626 million in 2021 to $1.62 billion in 2025, and that EBITDA will increase from $74 million to $322 million. The insurance side of the business would grow from $581 million this year to $1.5 billion in 2025, according to estimates in the investor presentation.
The transaction with Itasca, Ill.-based Aldel Financial values Hagerty at a pro forma enterprise value of $3.13 billion and “provides cash proceeds to fuel Hagerty’s strategy to accelerate its digital innovation initiatives,” according to an announcement about the definitive business combination agreement. The combined company would take on the Hagerty name at the close of the deal and would trade its shares on the New York Stock Exchange.
The deal includes a commitment of $704 million in private investment in public equity that’s led by strategic partners State Farm, Markel Corp., and other institutional investors.
Hagerty also offers auto enthusiast members a driver’s club, more than 2,500 events annually, automotive media content platform and valuation tools.
“We believe this transaction will help to accelerate Hagerty’s many growth opportunities and realize our bold mission to build the best automotive enthusiast brand in the world and save driving and car culture for future generations,” CEO McKeel Hagerty said in a statement. “As we look ahead, we are focused on investing in Hagerty’s digital user experience interfaces to support our growing membership base, while we continue to expand our portfolio with highly engaging car events and exciting services.”
Directors at Aldel have unanimously approved the transition, which is expected to close in the fourth quarter. In April, Aldel closed on an initial public offering that raised $116 million.
Aldel Chairman and CEO Robert Kauffman, who currently serves as an independent board member at Hagerty, said Hagerty offered “a highly differentiated growth story with a large market opportunity,” plus a “proven financial profile with a predictable and consistent revenue model and strong corporate culture and leadership model.”
“We couldn’t be more excited to work with McKeel and his team to help them grow and reach our collective goals. We ran an extensive process, and Hagerty represented what we were looking for in a partner for Aldel and our stockholders,” Kauffman said in a statement. “We believe our complimentary [sic] skills and contacts will further accelerate the Hagerty flywheel.”
J.P. Morgan Securities LLC served as financial adviser to Hagerty, which was advised by the law firm of Sidley Austin LLP. Global Leisure Partners LLC and ThinkEquity LLC are serving as financial advisers to Aldel, while Loeb & Loeb LLP was legal adviser.