Item 8.01. Other Events.
On December 8,
2020, HC2 Holdings, Inc. (the “Company”) received from representatives of Continental General Holdings LLC (the
“Buyer”), an affiliate of Michael Gorzynski, a director and beneficial owner of approximately 6.6% of the
Company’s outstanding common stock, a non-binding indication of interest for the potential acquisition by the
Buyer of the insurance segment of the Company (the “Indication of Interest”). The Company’s insurance
segment is comprised of Continental Insurance Group Ltd. and its indirect, wholly-owned subsidiaries Continental General
Insurance Company and Continental LTC Inc. (collectively, “Continental”). Prior to the receipt of the Indication
of Interest, the board of directors of the Company (the “Board”) waived certain standstill provisions contained
in that certain Cooperation Agreement, dated as of May 13, 2020, by and among the Company, MG Capital Management Ltd., Percy
Rockdale LLC and Rio Royal LLC (each, an affiliate of Mr. Gorzynski), as amended.
The Indication of
Interest currently contemplates a total potential transaction value of approximately $90 million, subject to certain
adjustments, consisting of, among other things, a combination of $65 million in cash and the transfer to HC2 (or
cancellation) and/or modification of the terms of certain HC2 and HC2-affiliate securities owned by Continental.
The Indication of
Interest contemplates a request for a 30-day exclusivity
period, although the Company has advised the Buyer that it is not prepared to enter into an exclusivity agreement with
respect to the transactions contemplated by the Indication of Interest at this time.
The Indication of
Interest states that the transactions contemplated thereby are expected to be conditioned on, among other things, receipt of all necessary regulatory approvals (including approval by the Texas Department of
Insurance), receipt of other required consents and
approvals, receipt of a fairness opinion and approval by the Board.
The
Board intends to engage a financial advisor, following which time it expects to carefully evaluate the Indication of Interest
and, if appropriate, negotiate with representatives of the Buyer. Mr. Gorzynski, Executive Chairman of Continental in
addition to his role as an HC2 director, and Kenneth Courtis, an HC2 director, are recusing themselves from Board
deliberations on this matter. The Company is not in a position to make any prediction at this time as to its response to the
Buyer or any outcome relating to the Indication of Interest. There
can be no assurance that any proposal or binding offer will be made or accepted, that any definitive agreement will be
executed (or the timing or final terms thereof), or that any transaction will be consummated in connection with the
Indication of Interest.
On December 10, 2020,
the Company issued a press release, announcing, among other things, the Company’s receipt of the Indication of Interest.
A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Forward Looking Statements
This Current
Report contains, and certain oral statements made by our representatives from time to time may contain, forward-looking
statements regarding the Indication of Interest and the transactions contemplated thereby, all of which involve risks,
assumptions and uncertainties, many of which are outside of the Company’s control, and are subject to change.
Accordingly, no assurance can be given that any proposal or binding offer will be made or accepted, or that any transaction
will be consummated on the terms contained in the Indication of Interest, or at all. All forward-looking statements speak
only as of the date made, and unless legally required, HC2 undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future events or otherwise. Please refer to the
Company’s filings with the U.S. Securities and Exchange Commission, including its most recently filed Annual Report on
Form 10-K and subsequent Quarterly Reports on Form 10-Q, for additional information about the risks and uncertainties related
to the Company’s business that may affect the forward-looking statements made in this Current Report.