A Bermuda insurer that sought to take over its largest domestic competition now faces potentially being controlled itself by the takeover target.

BF&M Limited has agreed with the largest shareholder of the Argus Group to a multifaceted strategic partnership granting BF&M the exclusive option to a stake in Argus.

Just this June, the Argus Group subsidiary Bermuda Life Insurance Company Limited was said to have entered into a share purchase agreement with Lawrie (Bermuda) Limited, a wholly owned subsidiary of Camellia plc, to purchase Camellia’s 36.9 per cent shareholding in BF&M Limited.

The June announcement was the culmination of a BF&M review of strategic alternatives to maximise shareholder value, potentially including the sale of the whole of the company.

In January, BF&M confirmed that it had concluded that strategic review, without selling the company and Camellia, the largest shareholder, then directly sought a purchaser for their stake.

Enter Argus with its proposed purchase, although later revealed to be absent of approval from its largest shareholder, Equilibria Capital Management Limited, a Bermuda-headquartered global asset management company.

But now BF&M has a proposed deal with Equilibria Capital, pending regulatory approvals.

Under the terms of the strategic partnership, Equilibria will grant BF&M an exclusive option to acquire a 13.7 per cent stake in Argus. BF&M is not obliged to exercise its right under the option but may choose to do so.

Additionally, BF&M will invest in a dedicated fund that will hold a 16.3 per cent stake in Argus.

In a filing with the Bermuda Stock Exchange, Argus has just advised that as of Wednesday, Equilibria Capital held 31.56 per cent of Argus shares.

BF&M said the partnership creates several other compelling strategic and financial benefits, including:

• Sale-leaseback transaction: Equilibria will acquire BF&M’s headquarters and adjoining building on Pitts Bay Road (110 Pitts Bay Road and 112 Pitts Bay Road) and enter into a long-term lease agreement with BF&M for the buildings. This transaction will enable BF&M to further strengthen its balance sheet while allowing the company to continue to serve its clients from its historical headquarters

• Asset management initiatives: Equilibria will provide BF&M access to a range of investment opportunities to further diversify its portfolio and achieve enhanced returns. As part of this agreement, BF&M has committed to a significant investment in a dedicated Equilibria investment fund that will focus on projects of mutual interest. This will include the initial investment in respect of a 16.3 per cent stake in Argus

BF&M said it will not require any external financing to either exercise its option or to fund its investment in the Equilibria-dedicated fund.

Anthony Joaquin, chairman of BF&M, said: “Our board and leadership team have carefully considered this transaction to ensure it was in our shareholders’ best interests in light of the proposed transaction between Camellia and Argus.

“With this multifaceted strategic partnership and stock purchase right, BF&M believes it is well positioned to add significant and sustained value for shareholders, clients, employees and the broader insurance sector in Bermuda.”

Abigail Clifford, BF&M group president and CEO, stated: “We are excited to establish an expansive relationship with Equilibria on multiple fronts to enhance BF&M’s strategic positioning and ability to lead the continued growth of Bermuda’s insurance sector.

“We look forward to collaborations geared towards realising further capital efficiencies and gaining access to additional asset allocation opportunities through a trusted capital management partner.”

Daniel Tafur, partner at Equilibria, stated: “We believe that this strategic partnership sets the stage for the creation of significant shareholder value for both BF&M and Equilibria as well as all other Argus shareholders.

“BF&M has a storied history spanning over 120 years and is uniquely positioned financially and strategically to lead the growth of Bermuda’s insurance sector in the coming years. We look forward to working with BF&M and its management team on a range of important initiatives.”