Lemonade to buy Metromile for $500mn as it seeks to speed auto build-out
Lemonade has announced that it entered an agreement to acquire auto InsurTech Metromile, the company said Monday.
The acquisition will occur through an all-stock transaction, implying a diluted equity value of $500mn, or $200mn net of cash.
Under the terms of the transaction, Metromile shareholders will receive Lemonade common shares at a ratio of 19:1, Lemonade said.
The deal is expected to close during the second quarter of 2022, contingent on all regulatory approvals being secured. The transaction will require approval of Metromile stockholders and is subject to customary closing conditions.
Metromile has 49 state licenses, over $100mn of in-force premium (IFP) and over $250mn of cash in its balance sheet, the statement said.
Daniel Schreiber, Lemonade CEO and cofounder, said: “We launched Lemonade Car last week, and we think you’ll love how it looks and handles. Pop the hood and you’ll see that it's powered by telematics and architected to learn from the data it generates, with precision pricing as its ultimate destination.”
“That’s where Metromile comes in. They have been down this road billions of times, and their proprietary data and machine learning algorithms can vault us over the most time and cost intensive parts of the journey.”
“In a vast and competitive market like auto insurance, today’s deal is a huge unlock of value for our customers and shareholders,” he continued.
Last week, Lemonade finally launched its personal car insurance product --Lemonade Car-- six months after it announced its intentions to expand into the automotive sector.
News of the auto coverage was well received on Wall Street, as Lemonade stock shot up as much as 16% in early trading.
With the new product, the InsurTech began providing customers an opportunity to bundle home, pet and life policies with car insurance in Illinois, but the firm plans to roll out the product across the US and committed to offer lower rates and coverage for electric vehicles and hybrid cars.
But with the acquisition of Metromile, Lemonade accesses a full range of auto coverages, including liability, car and medical products.
In February, Metromile started trading on the Nasdaq exchange following the merger with the Cohen & Company special purpose acquisition company (Spac) Insu II.
Six months after its debut, the pay-per-mile auto insurer was downgraded by Piper Sandler and Cantor Fitzgerald, following the disappointing results that the San Francisco-based InsurTech posted during the second quarter.
Metromile’s stock closed Monday trading at $3.16 per share, almost 70% from the $10 per share listing price at which INSU II debuted last year.
The deal brings together two of the high-profile InsurTech business that have gone public in the last year and a half.
Lemonade was by some measures the best performing IPO of 2020, finishing last year at $113 per share, almost quadruple its $29 per share offering price. The shares peaked at $183 in January of this year, the day on which the InsurTech announced it was raising an additional $466mn in net proceeds from additional share issuance.
At the time, the company’s soaring share price led some to speculate, which Lemonade’s management team hadn’t ruled out.
Lemonade’s shared closed at $70.50 per share on Monday, down about 60% from their high in January.