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Arch Capital to Acquire 29.5% Stake in Credit Insurer Coface

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Zacks Equity Research
·3 min read
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Arch Capital Group Ltd. ACGL has inked a deal with France-based corporate and investment bank Natixis to buy 29.5% stake in  trade-credit insurance firm Coface. The transaction is subject to antitrust and regulatory approvals. The deal value is around 480 million euros ($520 million).

Per this deal, shares of Coface will be acquired for €10.70 per share, leading to a transaction value of roughly €480 million based on the current number of shares.

Following the transaction, Natixis’ stake in Coface will be reduced to 12.2%, thus freeing up its solvency capital.

Bois-Colombes-based Coface, a world leader in credit insurance, offers comprehensive line of credit insurance to protect companies against potential non-payment by their customers. Its sound financial strength and access to the reinsurance market enables its clients to offer their buyers payment deadlines that exceed their own financing abilities.

The deal is strategic fit for Arch Capital as it boosts its efforts to develop uncorrelated sources of underwriting income.

Following the deal, Natixis’ seven representatives will no longer serve on Coface's board of directors. They will be replaced by four nominees of Arch Capital. As a result, the majority of Coface’s board members will be independent.

Arch Capital Group, a Bermuda based company, offers insurance, reinsurance and mortgage insurance on a global basis with operations in Bermuda, the United States, Canada, Europe, Australia and Hong Kong, with a focus on specialty lines. It has made a number of acquisitions. The buyouts have helped it to diversify its business, increase capabilities, enhance operations and expand global footprint.

Shares of this Zacks Rank #3 (Hold) property and casualty insurance have gained 37.1% in the past year, outperforming the industry’s rally of 8.3%. The company’s policy of ramping up growth and capital position should continue to drive share price higher.

Stocks to Consider

Some better-ranked stocks from the same space are First American Financial Corp. FAF, Fidelity National Financial, Inc. FNF and Cincinnati Financial Corp. CINF each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

First American Financial, Fidelity National Financial and Cincinnati Financial surpassed estimates in each of the last four quarters, with average positive surprise of 17.68%, 14.83% and 17.86% respectively.

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Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
First American Financial Corporation (FAF) : Free Stock Analysis Report
Fidelity National Financial, Inc. (FNF) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
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