Arthur J. Gallagher Gains on Acquisitions

Zacks

Shares of Arthur J. Gallagher & Co.’s (AJG) gained almost 7.5% to $47.59 since the onset of fourth-quarter 2013, reflecting investors’ enthusiasm about its impressive inorganic growth story so far.

The Inorganic Growth Story

Recently, Arthur J. Gallagher & Co. closed the acquisition of London-based Giles Group of Companies. The all-cash transaction cost the company £233 million or $366.4 million (£237 or $368.6 million in net cash less the value of tax and other assets acquired). The acquisition of Giles, an independent retail broker in the U.K. will inflate Arthur J. Gallagher & Co.’s client base in the middle-market and enhance its underwriting footprint via current underwriting business and increased retail distribution opportunities through broker networks.

Other acquisitions in November include The Parks Johnson Agency based in Lake City, Fla. and Employee Benefits Analysis Corporation (:EBAC), both for an undisclosed amount.

While The Parks Johnson Agency’s solid Florida presence through its employee benefit consultation and insurance brokerage services across the southeast part of the United States is expected to complement Arthur J. Gallagher & Co.’s employee benefits operations, EBAC is expected to complement the acquirer’s South-Central employee benefit brokerage operations.

Furthermore, in an effort to strengthen its foothold in Kansas, Arthur J. Gallagher & Co. acquired Overland Park, KS-based RJ Dutton Incorporated (RJ Dutton) for an undisclosed amount in the last month. The acquisition is expected to enrich Arthur J. Gallagher & Co.’s employee benefits operations besides adding strength to its client base in Kansas.

Arthur J. Gallagher & Co. also fortified its Western Region brokerage operations by acquiring San Diego-based G. S. Levine Insurance Services Inc. for an undisclosed amount in October. The acquisition will give Arthur J. Gallagher & Co. the fruits of a wider product base with additional clients for its property and casualty insurance services.

Arthur J. Gallagher & Co. has been continually undertaking acquisitions to ramp up its growth profile. The company’s sturdy financial position continues to support its robust acquisition strategy.

In the last reported quarter, the company closed eight acquisitions with annualized revenues of $135.5 million.

At the Peers

Among other insurance brokers following the inorganic growth route, Mercer, the consulting wing of Marsh & McLennan Companies Inc. (MMC), announced its intention to purchase the pension wind-up operations of PricewaterhouseCoopers (PwC) in Canada in August. Brown & Brown Inc. (BRO) also closed its merger with Beecher Carlson Holdings, Inc. in July.

Arthur J. Gallagher & Co. presently holds a Zacks Rank #3 (Hold). Insurance broker Aon plc (AON) with a Zacks Rank #2 (Buy) is however, worth considering.

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