United States securities and exchange commission logo
September 23, 2021
Robert I. Kauffman
Chairman and Chief Executive Officer
Aldel Financial Inc.
105 S. Maple Street
Itasca, IL 60143
Re: Aldel Financial
Inc.
Preliminary Proxy
Statement on Schedule 14A
Filed August 27,
2021
File No. 001-40244
Dear Mr. Kauffman:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Preliminary Proxy Statement on Schedule 14A filed August 27, 2021
Questions and Answers About the Proposals
Q. What interests do Aldel's current officers and directors have in the
Business Combination?,
page 11
1. We note your disclosure
that the Sponsor, as well as the officers, directors and advisors of
Aldel have agreed to
waive their redemption rights with respect to any shares of Aldel s
capital stock they may
hold in connection with the consummation of the Business
Combination. Please
describe any consideration provided in exchange for this agreement.
Summary of the Proxy Statement, page 18
2. Please revise the
forepart of your document to add diagrams depicting the pre-
combination
organizational structure of both Aldel and Hagerty and the post-combination
organizational
structure of the combined company. Also, please ensure that these
diagrams, as
applicable, clearly identify ownership percentages of the different
Robert I. Kauffman
FirstName LastNameRobert I. Kauffman
Aldel Financial Inc.
Comapany 23,
September NameAldel
2021 Financial Inc.
September
Page 2 23, 2021 Page 2
FirstName LastName
securityholder groups, such as the Sponsor, the public shareholders of
Aldel, existing
shareholders of Hagerty, and the PIPE investors under both no and
maximum redemption
scenarios.
3. We note your disclosure on page 19 regarding your Net Promoter Score
(NPS). Please
revise to briefly explain how NPS is measured and its significance, or
alternatively,
include a cross-reference to your related disclosure elsewhere (e.g.,
pages 186 and 207).
Risk Factors
We may be subject to cyberattacks, and our reliance on third party
providers..., page 39
4. We note your disclosure that you "experienced an unauthorized access
into [your] online
insurance quote system in 2021 where certain pieces of consumer data
were
compromised." Please describe in greater detail any material impact of
this incident and
discuss the adequacy of preventative actions taken to reduce
cybersecurity risks and the
associated costs. See Item 105 of Regulation S-K and the Commission
Statement and
Guidance on Public Company Cybersecurity Disclosures dated February
26, 2018.
Risks Related to Aldel and the Business Combination, page 57
5. Please disclose the material risks to unaffiliated investors presented
by taking the
company public through a merger rather than an underwritten offering,
including the
absence of due diligence conducted by an underwriter subject to
liability for any material
misstatements or omissions in a registration statement.
6. Please highlight the risk that the Sponsor will benefit from the
completion of a business
combination and may be incentivized to complete an acquisition of a
less favorable target
company or on terms less favorable to shareholders rather than
liquidate.
7. Please highlight that the Sponsor and public shareholders may
experience different rates
of return and clarify if the Sponsor and its affiliates can earn a
positive rate of return on
their investment, even if other shareholders of Aldel experience a
negative rate of return in
the post-business combination company.
Aldel s Public Stockholders may experience dilution as a consequence of,
among other
transactions, the issuance of Common Stock..., page 63
8. Please revise to disclose all possible sources and extent of dilution
that shareholders who
elect not to redeem their shares may experience in connection with the
business
combination. Provide disclosure of the impact of each significant
source of dilution,
including the amount of equity held by founders, convertible
securities, including warrants
retained by redeeming shareholders, at each of the redemption levels
detailed in your
sensitivity analysis, including any needed assumptions.
9. Please quantify the value of warrants, based on recent trading prices,
that may be retained
by redeeming stockholders assuming maximum redemptions and identify
any material
resulting risks. Also, revise your disclosure to show the potential
impact of redemptions
Robert I. Kauffman
FirstName LastNameRobert I. Kauffman
Aldel Financial Inc.
Comapany 23,
September NameAldel
2021 Financial Inc.
September
Page 3 23, 2021 Page 3
FirstName LastName
on the per share value of the shares owned by non-redeeming
shareholders by including a
sensitivity analysis showing a range of redemption scenarios,
including minimum,
maximum and interim redemption levels.
10. It appears that underwriting fees remain constant and are not adjusted
based on
redemptions. Please revise your disclosure to disclose the effective
underwriting fee on a
percentage basis for shares at each redemption level presented in your
sensitivity analysis
related to dilution.
Proposal 1 The Business Combination Proposal
PIPE Subscription Agreements, page 124
11. Please highlight material differences in the terms and price of
securities issued at the time
of the initial public offering as compared to private placements
contemplated at the time
of the business combination. Also discuss the key terms of any
convertible securities
(e.g., the PIPE Warrants) and disclose the potential impact of those
securities on non-
redeeming shareholders.
Executive Officers and Directors of Aldel
Conflicts of Interest, page 169
12. You state on page 252 that your existing corporate charter waives the
corporate
opportunities doctrine. Please revise your disclosure on page 169 to
clarify that your
charter currently includes this provision. Please also briefly discuss
whether this
provision impacted your search for an acquisition target.
Information About Hagerty, page 182
13. Please revise to provide independent support for the following
statements:
in the fourth bullet on page 182, the statement that the valuation
tools available on
your automotive enthusiast platform are "market-leading";
in the first paragraph on page 183, the statement that you are one
of the "leading
providers of collector insurance"; and
in the second paragraph on page 188, the statement that most other
specialty
insurance companies that offer collector vehicle insurance are
"small relative to
Hagerty."
14. Please disclose in greater detail the material terms and conditions
of:
the four distribution partner marketing relationships to which
approximately 16% of
your commission revenues are attributed, as disclosed at the
bottom of page 37;
your contracts or relationships with key underwriting carrier
partners, including
Markel, Aviva and State Farm, from which you derive a large
portion of your
revenue, as disclosed on page 46; and
the joint venture you formed in 2020 to build out Hagerty Garage +
Social, as
disclosed at the bottom of page 186.
Robert I. Kauffman
FirstName LastNameRobert I. Kauffman
Aldel Financial Inc.
Comapany 23,
September NameAldel
2021 Financial Inc.
September
Page 4 23, 2021 Page 4
FirstName LastName
Management of New Hagerty After the Business Combination
Director Independence, page 199
15. We note your disclosure on page 72 that following consummation of the
Merger, New
Hagerty will qualify as, and intends to elect to be treated as, a
controlled company under
the NYSE listing standards and will not be required to comply with
certain provisions of
the NYSE listing requirements. Please include related disclosure in
this section.
Management's Discussion and Analysis of Financial Condition and Results of
Operations of
Hagerty
Overview, page 204
16. Please discuss, including quantitatively where possible, any known
trends or uncertainties
that have had, or that you reasonably expect will have, a material
favorable or unfavorable
impact on revenue or results of operations. We note by way of example
a significant
decrease in net income for the six months ended June 30, 2021 compared
to the same
period in 2020. Refer to Item 303(a) of Regulation S-K and Section
III.B.3. of Release
No. 33-8350.
Components of Our Results of Operations
Membership and Other Revenue, page 209
17. Please revise to address how you recognize revenues for each of the
channels identified as
part "membership and other revenue" on page 206.
Costs and Expenses
Salaries and benefits, page 211
18. Please revise to quantify the numerical increase in new employees that
led to the 21.3%
growth in these costs during the period.
Earned premium, page 211
19. Please revise to disclose amount of written premiums in each of the
periods presented.
Membership and other revenue, page 211
20. Please revise to quantify the different components of membership and
of other revenues
with more granularity and discuss the reasons for related specific
changes during the
periods presented.
Results of Operations
Commission and fee revenue, page 211
21. Please revise to separately disclose the revenues recognized from both
new and renewal
policies in force during the periods presented.
Robert I. Kauffman
FirstName LastNameRobert I. Kauffman
Aldel Financial Inc.
Comapany 23,
September NameAldel
2021 Financial Inc.
September
Page 5 23, 2021 Page 5
FirstName LastName
22. Please revise to separately (i) disclose here the revenues you
recognize from agent and
direct sources and (ii) discuss the reasons for changes within
and among these
categories for each of the periods presented. In addition, revise to
address whether
commission revenue percentages differ depending on the source.
23. Please revise to provide a discussion of revenues, trends, and change
drivers in each of the
geographic areas in which you operate (the U.S., Canada, and the U.K.)
for the periods
presented.
Ceding commission, page 212
24. Please revise to (i) disclose the amount of premiums ceded and the
U.S. quota share
percentages in each period presented and to (ii) address the reasons
for period-over-period
changes.
Depreciation and amortization, page 212
25. Please revise to provide a discussion of the impact that each of your
business
combinations and asset acquisitions had on the depreciation and
amortization expense for
the periods presented.
Liquidity and Capital Resources, page 216
26. Please revise to provide a more granular discussion of the operating,
investing, and
financing cash flow activities, including quantification of the
material components
impacting these cash flows and driving changes for the periods
presented.
Description of New Hagerty's Securities After the Business Combination, page
238
27. Please clarify whether recent common stock trading prices exceed the
threshold that
would allow you to redeem public warrants. Additionally, please
clearly explain the
steps, if any, you will take to notify all shareholders, including
beneficial owners,
regarding when the warrants become eligible for redemption.
Security Ownership of Certain Beneficial Owners and Management of Aldel and New
Hagerty,
page 256
28. Please also disclose the Sponsor's and its affiliates' total potential
ownership interest in the
combined company, assuming exercise and conversion of all securities
they own,
including equity securities that the Sponsor has the right to acquire
beyond 60 days.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Robert I. Kauffman
Aldel Financial Inc.
September 23, 2021
Page 6
You may contact Marc Thomas at (202) 551-3452 or Cara Lubit at (202)
551-5909 if you
have questions regarding comments on the financial statements and related
matters. Please
contact David Lin at (202) 551-3552 or J. Nolan McWilliams at (202) 551-3217
with any other
questions.
Sincerely,
FirstName LastNameRobert I. Kauffman
Division of Corporation
Finance
Comapany NameAldel Financial Inc.
Office of Finance
September 23, 2021 Page 6
cc: Janeane R. Ferrari
FirstName LastName