Strategy International, RS Group to Join

Toronto-based RS Group (formerly Rent Shield Corp.) and Strategy International Insurance Group Inc. have announced that they intend to enter into an agreement that will result in RS Group’s becoming a wholly owned subsidiary of Strategy International.

“The management teams of both companies have determined that the long-term objectives of Strategy International and RS Group are converging,” said the announcement. “Strategy International and RS Group believe that combining the strengths of both companies will allow them to pursue new revenue opportunities, while optimizing administrative economies of scale and investment decisions across the companies. The move supports Strategy’s continuing plan to deliver value to its risk-management customers across multiple distribution channels while structuring the transaction to minimize the effect of channel conflict.”

RS Group structures and sells a series of pass-through risk specialty insurance and reinsurance platforms throughout North America, specializing in rental guarantees for the property development market.

Strategy Insurance Limited is a Barbados-formed and licensed provider of specialty lines of insurance, reinsurance and structured risk underwriting, focusing on credit risk and credit enhancement. It is a wholly owned subsidiary of Strategy Holding Company Limited, a Barbados company, which is in turn a subsidiary of Strategy International Insurance Group Inc.

“The integration of the marketing and investment strength of RS Group into the underwriting position of Strategy International provides both companies with the necessary flexibility to provide the best service to their customers and the efficient marketing of services and enhancement of sustainable customer relationships,” the bulletin continued. “Once the purchase is completed, RS Group will become a wholly-owned subsidiary of Strategy International. Strategy does not plan to change RS Group’s executive team, strategic direction or branding.”

Commenting on the announcement, RS CEO John Hamilton stated: “This integration represents a natural convergence of two operations, which have complementary abilities and similar long-term objectives. The combined strength of underwriting expertise and product knowledge will allow management to fulfill its operational aspirations.”

Plans call for Strategy International to offer cash and stock, for RS. This would value RS Group common stock at $1.75 per common share for all of the Group’s outstanding common stock (approximately 65 million shares). It represents a 237 percent premium over the closing price of $0.52 on Dec. 15, 2004.

“Strategy International, with input from RS Group, is in the process of determining the most effective method of achieving this acquisition. The transaction will not be conditioned upon Strategy International obtaining any financing,” the bulletin added.

“This acquisition provides Strategy with marketing and management resources that further enhance the Company’s expansion. RS Group’s proven product expertise and administrative capabilities will be an exceptional addition to the Strategy underwriting group,” commented Strategy International President and CEO Stephen Stonhill.

The transaction is expected to close on or about March 1, 2005, subject to the necessary shareholder and regulatory approvals. Strategy International estimates that the proposed transaction will be neutral to its 2004 earnings.