Carrying forward its consistent trend of buyouts, Arthur J. Gallagher & Co. (AJG) acquired Oval Group of Companies, for approximately 199 million pounds in a bid to fortify its presence in the United Kingdom. The company expects to fund the transaction with its free cash balance and borrowings on its line of credit.
Arthur J. Gallagher & Co.’s strong financial position comprising substantial cash balance and retained earnings continues to support its series of acquisitions.
Oval Group is an independent commercial insurance broker and operates from several locations across the United Kingdom. Oval Group, through its retail business and benefit, wealth management and healthcare operations, generates nearly 80 million pounds in annualized revenues.
The acquisition is expected to expand Arthur J. Gallagher & Co.’s retail distribution and is likely to position the acquirer as a leading U.K. retail commercial broker, operating from 70 different locations. Moreover, strong geographic presence of Oval Group and its specialized niche practice groups should further enrich Arthur J. Gallagher & Co.’s own portfolio.
Additionally, Arthur J. Gallagher & Co. expects to generate over 22 million pounds of EBITDAC (before integration costs) from the transaction and the same should increase to 27 million pounds by 2016, indicating operational synergies.
Arthur J. Gallagher & Co. regularly undertakes acquisitions to augment its product and service offerings and leverage its international footprint. In the fourth quarter of 2013, the company undertook eleven acquisitions.
The most recent deal was the one made in the last week of March, whereby Arthur J. Gallagher & Co. acquired New York-based retail insurance broker, Spataro Insurance Agency, Inc. Prior to that, in the beginning of March, the company had inked a deal to acquire a majority stake in Latin American property and casualty insurer – JAO & Partners.
Other Stocks to Consider
Arthur J. Gallagher & Co. presently carries a Zacks Rank #4 (Sell). Better-ranked insurance brokers include Marsh & McLennan Companies, Inc. (MMC), Hannover R (HVRRY) and Erie Indemnity Co. (ERIE). All these stocks carry a Zacks Rank #2 (Buy).