Hartford Financial Services Group’s $2.05 billion sale of Talcott Resolution

The Hartford’s financial advisors for the transaction are J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC and the company’s legal advisor is Sidley Austin LLP. The financial advisor for the investor group is BofA Merrill Lynch.

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.

Sidley represented The Hartford Financial Services Group, Inc. with

Perry Shwachman (Picture), Jon Kelly, Jeremy Watson, Chad Vance, Vince Onorato, Jack Yamin, Brad Drake, Julie Snyder, Vicky Kandabarow, Marisa Young, Seulbee Lee, Blake Vettel, Katie Yonover, John White, Injune Park, Margaret Schwartz, Jeremy Carroll (Insurance); Tracy Williams, Peter Edgerton, Katie Funkhouser (Tax); Gabe Saltarelli, Eric Halperin (Corporate); Jonathan Lotsoff, Eileen Liu, Teresa Napoli, Natalie Chan (Employee Benefits/Labor); Rusty Weiss, Lauren Grau, Ryan Hicks (Intellectual Property); Dan Spies, Amy Pollak (Investment Products); Liz McCloy, Erica Taschler (Real Estate); Joel Mitnick and Jamie Sadler (Antitrust).

 

Involved fees earner: Perry Shwachman – Sidley Austin LLP; Jonathan Kelly – Sidley Austin LLP; Gabe Saltarelli – Sidley Austin LLP; Eric Halperin – Sidley Austin LLP; Jeremy Watson – Sidley Austin LLP; Chad Vance – Sidley Austin LLP; Vincent Onorato – Sidley Austin LLP; Jack Yamin – Sidley Austin LLP; Marisa Young – Sidley Austin LLP; Bradley Drake – Sidley Austin LLP; Julie Snyder – Sidley Austin LLP; Victoria Kandabarow – Sidley Austin LLP; Seulbee Lee – Sidley Austin LLP; Blake Vettel – Sidley Austin LLP; Katie Yonover – Sidley Austin LLP; John White – Sidley Austin LLP; Injune Park – Sidley Austin LLP; Margaret Schwartz – Sidley Austin LLP; Jeremy Carroll – Sidley Austin LLP; Tracy Williams – Sidley Austin LLP; Peter Edgerton – Sidley Austin LLP; Katharine Funkhouser – Sidley Austin LLP; Jonathan Lotsoff – Sidley Austin LLP; Eileen Liu – Sidley Austin LLP; Teresa Napoli – Sidley Austin LLP; Natalie Chan – Sidley Austin LLP; Russell Weiss – Sidley Austin LLP; Lauren Grau – Sidley Austin LLP; Ryan Hicks – Sidley Austin LLP; Daniel Spies – Sidley Austin LLP; Amy Pollak – Sidley Austin LLP; Elizabeth McCloy – Sidley Austin LLP; Erica Taschler – Sidley Austin LLP; Joel Mitnick – Sidley Austin LLP; Jamie Sadler – Sidley Austin LLP;

Law Firms: Sidley Austin LLP;

Clients: The Hartford Financial Services Group, Inc.;

 

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Author: Ambrogio Visconti