Smart Employee Benefits (SEB), a provider of benefits processing solutions and services, has entered into a definitive debenture purchase agreement with The Co-operators.
The two signed an agreement for the issuance of a $20,000,000 convertible debenture, by way of a non-brokered private placement. According to a statement, the financing “solidifies SEB’s balance sheets and provides the capital to focus on numerous growth opportunities.”
The financing will be provided by The Co-operators Financial Services Limited. The proceeds will be used to repay SEB’s term indebtedness, as well as for general working capital purposes.
The debenture has an interest rate of 10% per annum, which will be paid semi-annually. The first interest payment is due on February 28, 2021, and the principal payment due at the maturity date being 60 months after the closing. A company release said that the interest rate may be reduced to a floor of 7%, depending on the success of certain business initiatives.
“To take advantage of its many business opportunities, SEB initiated the process to find a strategic investment partner in mid 2019. Scotia Capital was engaged to review strategic alternatives. The process has culminated with a financing agreement with The Co-operators who brings both capital and strategic partnership value,” said SEB president CEO, and CIO John McKimm.
McKimm added that The Co-operators appreciates the “strategic fit” between SEB’s technology division and benefit division, and the competitive advantage it gives SEB in creating value for clients and generating new business.
“The management and Board of SEB believe The Co-operators represents the optimal value for SEB shareholders near term and long term; as SEB continues its product innovation, adding powerful new features that enhance our value proposition to customers and partners,” the chief executive stated.
“The Co-operators has identified the group benefit and life insurance market as a strategic high growth opportunity, and believes SEB can play a material role in expediting our growth in this marketplace,” said The Co-operators executive vice president Alec Blundell. “This investment supports our ongoing strategic efforts to meet the diverse needs of Canadian employers and their workforces.”
