U.S. insurance group Clover Health will go public through consolidation with special purpose acquisition company Social Capital Hedosophia Holdings in a deal worth $3.7 billion, the company says.
The merger is the latest in a series of deals with blank-check companies, also known as SPACs, to have their shares listed on main exchanges.
The companies said Clover Health would get up to $728 million and around a half billion more will be allotted to other Clover investors in a deal that includes debt, a statement said confirming an earlier report by Bloomberg News.
The deal includes as much as $1.2 billion in cash proceeds, $400 million of which will be allocated through a private investment group led by Social Capital chief executive Chamath Palihapitiya. The deal will be backed by investors including Senator Investment Group LP and Fidelity Management & Research Co.
Clover Health, an insurance startup funded by Alphabet Inc. and Sequoia, sells Medicare insurance plans and uses platforms to help physicians in treating patients.
A blank-check company is a shell medium that secures money through public listing to acquire - and then combine - with another group, usually within two years.
Based on a July news release, Clover Health offers health insurance packages across seven U.S. states, covering 57,000 members. It plans to widen its international to 75 more counties from 34 now.
According to Palihapitiya during an interview with "Squawk Box" what they have is "a business that delivers the promise of technology-improving, better results and lower-cost healthcare," Yun Li of CNBC Markets quoted the venture capitalist as saying.
The Sri Lankan-born Palihapitiya - an early Facebook executive before engaging in the investment business and was instrumental in taking Virgin Galactic public in 2019 - is looking to secure up to $2 billion via IPOs for three new SPACs.
