Hagerty to go public via SPAC merger

Specialty automotive insurer Hagerty Group LLC plans to go public on the New York Stock Exchange via merger with a special-purpose acquistion company.

Hagerty, which focuses its insurance offerings on the "global automotive enthusiast market," plans to merge with Aldel Financial Inc., a SPAC led by investor Rob Kauffman. The deal values the Traverse City, Mich.,-based company at $3.13 billion and includes $704 million in private investment in a public equity financing from investors State Farm and Markel Corp.

The deal, set to close in the fourth quarter, will leave the Hagerty family with 52 percent control of the new publicly traded company, according to an investor presentation. The company will be listed as HGTY.

"For our members, this means a comprehensive and compelling experience that goes far beyond an insurance transaction," CEO McKeel Hagerty said in a news release. "For our business, this means market-leading brand loyalty, an attractive business model with multiple points of monetization, a track record of financial success and a strong foundation for future growth."

Hagerty employs about 1,550 people globally, with approximately 900 at the Traverse City headquarters.

The transaction, once closed, will provide the new company with about $820 million in gross proceeds, with about $116 million coming from Aldel Financial's April 2021 initial public offering.

"We couldn't be more excited to work with McKeel and his team to help them grow and reach our collective goals," Kauffman, chairman and CEO of Aldel, said in the release.

"We ran an extensive process, and Hagerty represented what we were looking for in a partner for Aldel and our stockholders," Kauffman continued. "Hagerty offers a highly differentiated growth story with a large market opportunity. The company also has a proven financial profile with a predictable and consistent revenue model and strong corporate culture and leadership model. We believe our complementary skills and contacts will further accelerate the Hagerty flywheel."

Hagerty this year acquired Detroit's Concours d'Elegance of America, a deal that followed its purchase of other automotive events such as the Greenwich Concours d'Elegance and the California Mille. Hagerty Drivers Club, with more than 650,000 members, stages special events, car shows, track days and seminars, and provides group discounts on car gear and driving.

In an investor presentation, Hagerty reported $500 million in revenue last year and is forecasting $626 million for this year. The presentation notes that the company expects annual revenue to exceed $1.1 billion by the end of 2023.

SPAC mergers have become increasingly popular routes for companies to go public, particularly as it tends to be a quicker route to the public markets and invite less regulatory scrutiny. Several EV startups have gone public via SPAC mergers.

Regulators, however, have been moving to crack down on the SPAC boom.

The U.S. Securities and Exchange Commission in recent months has moved to strengthen protections for investors in the so-called blank-check companies like Aldel, which exist only to go public and make an acquisition.

In testimony to a U.S. House committee in May, SEC Chair Gary Gensler said the wave of SPACs — 700 filings year-to-date at the time — were draining limited regulatory resources.

Automotive News contributed to this report.