Lemonade moves to take over Metromile

(Bloomberg) — Lemonade Inc. is bolstering its nascent auto-insurance business by acquiring pay-per-mile insurer Metromile Inc. in its first takeover.

The deal values San Francisco-based Metromile, which went public via a merger with a blank-check company earlier this year, at roughly $500 million, according to a statement Monday. Metromile shareholders will receive Lemonade common shares at a ratio of 19 to 1, and the deal is expected to close by mid-2022.

SoftBank Group Corp.-backed Lemonade, which went public last year, last week debuted an auto-insurance product called Lemonade Car, currently being sold in Illinois with plans to roll out the offering in other states. Buying Metromile helps New York-based Lemonade build up that business while giving it auto-claims data and a team that’s worked in the business for a decade, according to a Lemonade blog post.

“They have been down this road billions of times, and their proprietary data and machine-learning algorithms can vault us over the most time and cost-intensive parts of the journey,” Lemonade Chief Executive Officer Daniel Schreiber said in the statement. “In a vast and competitive market like auto insurance, today’s deal is a huge unlock of value for our customers and shareholders.”

In a phone interview, Schreiber said that most of Lemonade’s approximately 1.4 million customers are car owners, and that bundling its new car insurance with other business lines would allow the insurer to entice existing customers and new ones alike. He called it a “hugely symbiotic” opportunity.

Metromile shares were up 3.3% at 11:21 a.m. in New York, while Lemonade’s stock dropped 12%. Metromile has declined 79% this year, and Lemonade has fallen 49%.

Investors including Chamath Palihapitiya’s Social Capital haven’t fared well in recent quarters with Metromile. Social Capital and other investors committed to invest $160 million in a private purchase of the stock as part of the blank-check company merger. Now, Metromile is being sold for a fraction of its $1.3 billion equity value in that earlier merger with the special purpose acquisition company.

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