Arthur J. Gallagher & Co. (AJG) announced the acquisition of Australian insurer Blue Holdings Pty Ltd. The move marks the company’s effort to ramp up its risk management business and strengthen its footprint in Australia. Terms of the transaction were not disclosed.
However, the market did not respond favorably to the news, as the stock’s price fell 0.4% and closed at $48.63 per share in the trading session post announcement.
The acquisition reflects Arthur J. Gallagher’s consistent efforts to strengthen its presence in Australia. Earlier the company has acquired Instrat Insurance Brokers Pty Ltd, Parmia Pty Ltd and Wesfarmers Insurance Brokerage Operations. Takeover of Wesfarmers Insurance Brokerage for $938 million marks the biggest deal for the company.
Blue Holdings is an insurance broker and risk management services firm, providing its middle-market clients with retail property/casualty and insolvency insurance products and services in the country. It is an expert in offering coverage to the construction, transportation, engineering, mining and professional services industries.
Blue Holdings’ solid presence as well as its national insolvency practice, which will be a new specialization for Arthur J. Gallagher, will benefit the latter’s Australian operations.
Under the direction of Arthur J. Gallagher's Australian brokerage operation head, Andrew Godden, Blue Holdings CEO Richard Smith and his associates will continue to operate from their Brisbane, Perth, Sydney, Melbourne and Townsville locations.
This takeover marks the ninth one in the current quarter and 45th in the year-to-date tally. For the first nine months of 2014, the insurance broker generated annualized revenues of $693.6 million from acquisitions. Going forward, revenues are expected to grow further as the company’s strong liquidity cushions its inorganic growth initiatives.
Arthur J. Gallagher’s compelling inorganic growth and strong focus on strenthening its risk management busines will likely prompt analysts to raise its estimates, resulting in a rank upgrade. Currently, Arthur J. Gallagher carries a Zacks Rank #3 (Hold).
Insurance brokers are now increasingly opting for inorganic growth to boost prospects.
Notably, Mercer, a wholly owned subsidiary of Marsh & McLennan Companies (MMC), announced the acquisition of Swiss specialist private markets advisor and delegated solutions provider — SCM Strategic Capital Management AG — last month.
Correspondingly, Validus Holdings, Ltd. (VR) has acquired Western World Insurance Group, Inc.
Meanwhile, Willis Group Holdings Public Limited Co. (WSH) has proposed the takeover of SurePoint Reinsurance, along with the buyout of a range of Irish pension and financial advisory businesses from IFG Group plc.
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