Marsh & McLennan Companies Inc.’s (MMC) leading insurance brokerage wing – Marsh Inc. has announced the purchase of Montreal-based commercial insurance brokerage – Kocisko Insurance Brokers Inc. The move serves to consolidate the company’s presence in Canada. Notably, the terms and value of the deal were not revealed.
Kocisko Insurance primarily offers commercial insurance to construction operation across Quebec in Montreal. Additionally, the firm provides surety operations and risk management solutions to its construction clients in the region. Post-acquisition, Kocisko Insurance will operate under Marsh’s brand name.
Therefore, we believe that Kocisko Insurance will help Marsh & McLennan expand its core insurance brokerage services in Quebec, strengthen footprint in Montreal and boost brand value. Moreover, the deal blends well with Marsh’s scale and utility of operations. Over the past several years, Marsh has been strengthening its presence in potentially strong markets through mergers and acquisitions, thereby gaining competitive edge and meaningfully driving the top line.
Debt Issue
Marsh & McLennan has also issued long-term notes worth $800 million in a two-parts. Long-term notes of $300 million are dated to mature in 2019 and bear an interest of 2.35%. The remaining $500 million worth of notes are slated to mature in 2025 and carry an interest of 3.50%. The offering is expected to culminate by Sep 10.
Management projects utilization of the funds for enhancing operating leverage of the company. A part of it may also be used to redeem the existing long-tern senior set of notes that are due in Sep 2015 and Apr 2019, with an interest of 5.75% and 9.25%, respectively. Subsequently, the latest issue will help reduce borrowing costs without adding any significant financial risks.
Meanwhile, the markets’ response to the aforementioned developments could not be gauged, as shares of Marsh & McLennan have merely risen by 4 cents to $53.05 since the announcement.
Currently, Marsh & McLennan carries a Zacks Rank #3 (Hold). Better-ranked stocks in the financial sector include Euronet Worldwide Inc. (EEFT), FleetCor Technologies Inc. (FLT) and Erie Indemnity Co. (ERIE), all of which have a Zacks Rank #2 (Buy).
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