The Hartford’s $2.05 Billion Sale of Talcott Resolution

Sullivan & Cromwell represents Global Atlantic Financial Group, Pine Brook and J. Safra Group, Stroock is representing Atlas Merchant Capital, Debevoise & Plimpton LLP is advising Cornell Capital LLC

The Hartford has entered into a definitive agreement to sell Talcott Resolution, its run-off life and annuity businesses, to a group of investors led by Cornell Capital LLC, Atlas Merchant Capital LLC, TRB Advisors LP, Global Atlantic Financial Group, Pine Brook and J. Safra Group. Total consideration to The Hartford is $2.05 billion, comprised of cash from the investor group, a pre-closing cash dividend, debt included as part of the sale, and a 9.7 percent ownership interest in the acquiring company. The total consideration amount does not include $1.4 billion in dividends previously paid by Talcott Resolution in 2017. The sale is anticipated to close in the first half of 2018, subject to regulatory approval and other closing conditions.

Under the terms of the sale agreement and subject to regulatory approval, the investor group will form a new company that will purchase Hartford Life, Inc. (HLI), the holding company for the Talcott Resolution operating subsidiaries, for a net payment of $1.443 billion in cash. The Hartford will receive a 9.7 percent ownership interest, valued at $164 million, in the new company. Subject to regulatory approval, The Hartford also expects to receive $300 million in a pre-closing dividend from Talcott Resolution and will reduce its long-term debt by $143 million because debt issued by HLI will be included as part of the sale. In addition, The Hartford will retain Talcott Resolution tax benefits with an estimated GAAP book value of $950 million, which will be available for realization subject to the level and timing of The Hartford’s taxable income. As a result of The Hartford’s election to retain certain tax benefits, the company will not recognize a tax capital loss on the sale. Based on the terms of the sale and the retention of the tax attributes, The Hartford estimates that the sale will result in a GAAP net loss of approximately $3.2 billion, after tax, which would be recorded in discontinued operations in fourth quarter 2017.[1] The estimated loss on sale and the estimated retained tax benefits and our ability to realize such benefits are based on current tax law and are subject to a final determination of the tax basis of the operations sold. Beginning in fourth quarter 2017 and continuing until closing of the transaction, the results of operations of Talcott Resolution will be reported as discontinued operations for all periods presented in The Hartford’s financial statements.

Prior to the closing of the transaction, the company’s Group Benefits and Mutual Funds subsidiaries, which are currently subsidiaries of HLI, will be transferred to another Hartford subsidiary and will not be part of the transaction. In addition, immediately after closing, Talcott Resolution will reinsure a portion of its fixed annuity, payout annuity and structured settlement businesses to a subsidiary of Global Atlantic Financial Group (Global Atlantic). Following the sale, Hartford Investment Management Company (HIMCO), The Hartford’s investment management group, will continue to manage a significant majority of Talcott Resolution’s investment assets for an initial 5-year term. HIMCO also will be retained by Global Atlantic to manage certain assets associated with the post-closing reinsurance agreement.

Sullivan & Cromwell represents Global Atlantic Financial Group, Pine Brook and J. Safra Group with a team including Mitchell Eitel (Picture) and Andrew Gerlach, along with Louis Argentieri. David Spitzer advised on tax matters.

Debevoise & Plimpton LLP is advising Cornell Capital LLC with a team including Kevin M. Schmidt, Michael Bolotin, Gary M. Friedman, Nicholas F. Potter and Kevin A. Rinker; counsel Michael D. Devins; and associates Sarah Chai, Kristen A. Matthews and Daniel Priest

Stroock is representing Atlas Merchant Capital Bernhardt Nadell (M&A), Micah Bloomfield (Tax) and Bradley Kulman (M&A-PE). Other Stroock attorneys who assisted on the transaction include partners Michelle Jewett; Jeffrey Lowenthal; Ian DiBernardo; Steven Rabitz; Michele Jacobson and Robert Lewin; special counsels Beth Norton, Jeffrey Mann and Francis Healy; and associates Gary Ho, Carolyn Cox, Belinda Gao, Brian Friederich and Daniel Park

 

Involved fees earner: Bernhardt Nadell – Stroock; Bradley Kulman – Stroock; Jeffrey Lowenthal – Stroock; Gary Ho – Stroock; Belinda Gao – Stroock; Micah Bloomfield – Stroock; Michelle Jewett – Stroock; Ian DiBernardo – Stroock; Jeffrey Mann – Stroock; Steven Rabitz – Stroock; Beth Norton – Stroock; Brian Friederich – Stroock; Michele Jacobson – Stroock; Robert Lewin – Stroock; Francis Healy – Stroock; Kevin Schmidt – Debevoise & Plimpton; Nicholas Potter – Debevoise & Plimpton; Kevin Rinker – Debevoise & Plimpton; Michael Devins – Debevoise & Plimpton; Sarah Chai – Debevoise & Plimpton; Daniel Priest – Debevoise & Plimpton; Gary Friedman – Debevoise & Plimpton; Michael Bolotin – Debevoise & Plimpton; Kristen Matthews – Debevoise & Plimpton; Mitchell Eitel – Sullivan & Cromwell; Andrew Gerlach – Sullivan & Cromwell; Louis Argentieri – Sullivan & Cromwell; David Spitzer – Sullivan & Cromwell;

Law Firms: Stroock; Debevoise & Plimpton; Sullivan & Cromwell;

Clients: Atlas Merchant Capital LLC; Pine Brook Partners, LLC; Global Atlantic Financial Group; Cornell Capital LLC; J. Safra Sarasin Group;