Digital auto insurer Metromile plans to go public by merging with publicly traded INSU II (Nasdaq: INAQ), a special purpose acquisition entity sponsored by Cohen & Company (NYSE: COHN).
Under the deal, INSU II will combine with Metromile for approximately $842 million in INSU II Class A common stock, up to $30 million in cash and an additional 10 million Class A shares if certain price targets are met.
The combined company, to be led by Metromile CEO Dan Preston, will have a pro forma market capitalization of approximately $1.3 billion.
Investors Social Capital, Hudson Structured Capital Management, Miller Value, Clearbridge and Mark Cuban have committed to investing $160 million through a private placement of INSU II Class A common shares.
The new company seeks to expand into 49 states by the end of 2022, with a premium run-rate of $1 billion by the end of 2024, the company said.
Metromile launched in 2016 and is currently available in eight states, including California, New Jersey, Washington, Pennsylvania and Arizona. The firm offers an alternative approach to car insurance by charging premiums based on per-mile usage through an on-board device and digital app rather than industry-standard estimations. The company says its model allows customers, on average, to save about 47 percent over what they would pay with a traditional insurer. Metromile also licenses its cloud-based software to other insurance companies to help them increase efficiency, automate claims, reduce fraud losses and boost employee productivity.
Many of Metromile’s early investors plan to remain in the stock, including New Enterprise Associates (NEA), Hudson Structured, Intact Ventures, Tokio Marine, Index Ventures and Mark Cuban.
Metromile said the transaction will provide the firm with approximately $294 million at closing. The combined company plans to use the cash to pay down debt, expand into new markets and introduce new products.
The merger deal, which still needs shareholder approval, is expected to close during the first quarter of 2021.
J.P. Morgan served as financial adviser to Metromile on the deal. INSU II was advised by Cantor Fitzgerald, J.P. Morgan Securities, Wells Fargo and Northland Capital Markets.
On Sept. 3, Ford Motor Co. announced it was teaming up with Metromile. The arrangement will capitalize on technology developed by Ford and other major automakers that sends real-time data to the companies about cars’ whereabouts and other information.