(NYSE: KFS) Kingsway Financial Services Inc. today announced the closing of its acquisition of PWI Holdings, Inc. The addition of PWI further strengthens Kingsway’s position in the vehicle service contract and extended warranty industry.
“PWI is an excellent complement to Kingsway’s portfolio of vehicle service contract and extended warranty businesses,” said Kingsway President and CEO, J.T. Fitzgerald. “PWI has shown that it has the ability to continue its strong financial performance in spite of the challenges posed by the ongoing pandemic. We look forward to helping the PWI team continue to grow their business.” For the twelve month period ending September 30, 2020, PWI had $4.2 million of unaudited GAAP income before income taxes and $6.6 million of unaudited Non-GAAP EBITDA. A reconciliation of GAAP income before income taxes to Non-GAAP EBITDA is presented on the attached schedule. Even after taking into consideration the anticipated effects of purchase accounting and anticipated increases in expenses on a standalone basis, Kingsway expects the acquisition to be accretive.
“We are thrilled to join the Kingsway team,” said Edmund Field, President of PWI. “The Kingsway model of buying businesses with an eye toward long-term growth and value creation makes Kingsway the perfect home for PWI. I look forward to working with J.T. and the rest of the Kingsway team going forward.”
In connection with the acquisition, Kingsway fully repaid a legacy loan (the “KWH Legacy Loan”) to Kingsway Warranty Holdings LLC (“KWH”).
Kingsway financed the acquisition and the payoff of the KWH Legacy Loan with a combination of debt financing provided by CIBC Bank USA and cash on hand. KWH borrowed a total of $25.7 million, $24.7 million in the form of a term loan and $1 million in the form of a revolver (together, the “KWH New Loan”). The KWH New Loan has a variable interest rate, with the initial annual interest rate equal to 3.75%. The KWH New Loan requires quarterly principal and interest payments and the term loan matures on December 1, 2025. Based upon current interest rates, Kingsway anticipates incurring slightly less total interest expense under the KWH New Loan than the KWH Legacy Loan.
About Kingsway
Kingsway is a holding company that owns or controls subsidiaries primarily in the extended warranty, asset management and real estate industries. The common shares of Kingsway are listed on the New York Stock Exchange under the trading symbol “KFS.”
