Jenner & Block

Firm Represents Shift Technologies in Merger Agreement with Insurance Acquisition Corp.

On June 29, Shift Technologies Inc., an e-commerce platform whose mission is to make car-buying convenient, fair, and accessible for everyone, entered into a merger agreement with Insurance Acquisition Corp., a NASDAQ-listed special purpose acquisition company.  The combined company will bring to the public markets the newest pure-play in the used car ecommerce sector.  Under the agreement, a newly formed subsidiary of Insurance Acquisition Corp. will merge with and into Shift, with Shift surviving as a wholly-owned subsidiary of Insurance Acquisition Corp.  Insurance Acquisition Corp. will change its name at closing to Shift Technologies, Inc. and remain NASDAQ-listed under a new ticker symbol.

The aggregate consideration is $380 million in newly issued shares of Class A common stock of Insurance Acquisition Corp. plus an additional 6 million shares of Class A common stock to be issued at closing and released from escrow if the combined company achieves certain share price targets over time.

The transaction includes commitments for a $185 million private capital raise at $10 per share anchored by institutional investors.  Shift will use the proceeds to invest in multiple growth initiatives and support working capital, according to a press release.

The transaction also involves the preparation of a proxy statement/prospectus to be filed by Insurance Acquisition Corp with the SEC to seek approval of the transaction by IAC’s shareholders and to register the shares of common stock to be issued in the deal.

The deal comes at a time when the coronavirus has boosted online car sales, says an article in the Wall Street Journal.  The article quotes an analyst at Edmunds who observes that “as dealers shut down for the pandemic, more consumers who have grown accustomed to purchasing online moved to buy cars that way as well.”

The transaction is expected to close in the third quarter of 2020.  Following the close, Shift's management team will continue to operate the combined company.

"Shift's mission is to make car purchase and ownership simple.  Merging with Insurance Acquisition Corp. is the next step in our evolution and will enhance our ability to scale our operations as we continue to deliver one of the industry's broadest selections of used cars via our powerful technology platform.  We look forward to partnering in a transaction that provides an efficient path for a successful transformation to a public company,” said George Arison, Shift co-CEO, in the release.

The team is being led by Partners Ishan K. Bhabha, Robert J. Rawn and Martin C. Glass.  Other members of the team included Partner Jeremy A. Casper and Associates Amy Inagaki and William R. Erlain (M&A); Partner Jeffrey R. Shuman (securities); Partner Geoffrey M. Davis (tax); Partner Lee K. Van Voorhis (antitrust); Partner Matthew J. Renaud and Associate Maliha Ikram (employee benefits and labor) and Partner Steven R. Englund (IP).