Arthur J. Gallagher & Co. AJG inked a deal to acquire the global aerospace operations of Jardine Lloyd Thompson Group plc. The transaction is expected to strengthen the acquirer’s position in the aviation and aerospace sector. The buyout, which is subject to European Commission approval, is estimated to be completed this spring. The completion of the transaction is in connection with the closing of the Jardine Lloyd Thompson’s purchase by Marsh & McLennan Companies, Inc. MMC. Financial details of the transaction have been kept under wraps.
On Sep 17, 2018, Marsh & McLennan entered into an agreement to purchase Jardine Lloyd Thompson for a cash consideration of $5.6 billion in fully diluted equity value or an estimated enterprise value of $6.4 billion.
From the standpoint of Marsh & McLennan, the buyout is expected to add substantial value to the company’s operations and build a platform for providing clients with excellent service and team members with opportunities. The transaction will improve Marsh & McLennan’s capability to accelerate growth and margin expansion across products and geographies.
Shifting our focus to Arthur J. Gallagher, per the pact, the insurance broker will buy all the assets within Jardine Lloyd Thompson’s global aerospace retail and wholesale insurance brokerage division. This will consist of the operations in the United Kingdom, United States, Canada, Australia, New Zealand and 10 other countries spread across Europe, Latin America and Asia. This apart, the agreement also comprises the assets of Hayward Aviation, a UK insurance broker focusing on aviation for high-net worth individuals and smaller airlines.
Further, per the contract, around 250 employees will be part of Arthur J. Gallagher’s team. This will include nearly 100 employees within Jardine Lloyd Thompson’s London Market operations, who will join the insurance broker’s existing aviation division.
The buyout will not only solidify Arthur J. Gallagher’s position as a leading broker in the dynamic and compelling aviation and aerospace sector but also offer substantial growth opportunities pertaining to its international businesses. Moreover, the accretion of Jardine Lloyd Thompson’s operations will complement and fortify the acquirer’s already existing geographic footprint.
This acquisition is another effort on Arthur J. Gallagher’s part to expand outside the United States. In fact, last December, the company made acquisitions in countries like New Zealand, Australia and even in Asia, thereby cementing its geographical foothold.
For example, on Jan 7, 2019, Arthur J. Gallagher entered into a definitive agreement wherein it will acquire 100% of specialist UK insurance broker Stackhouse Poland Group Limited. The transaction will aid the acquirer to boost its service portfolio while continuing to bolster client service. The buyout is expected to be completed within the first quarter of 2019 on fulfilling certain regulatory conditions.
Arthur J. Gallagher derives about one-third of its revenues from international operations. Given the number and size of its non-U.S. acquisitions, the insurance broker hopes to witness a rise in international contribution to total revenues.
Given the insurance industry’s all-time high capital level, insurers are aggressively pursuing mergers and acquisitions to ramp up growth, expand geographies, enhance capabilities and diversify operations. Moreover, its inorganic pipeline remains robust with about $130 million of annualized revenues in 2019. The company flaunts an impressive growth profile, driven by organic sales plus a slew of merger and acquisition (M&A) activities. The company remains upbeat about its ability to tow in integration partners within its typical small tuck-in size at justifiable prices.
Shares of the Zacks Rank #3 (Hold) insurance broker have gained 8% year to date, underperforming its industry’s rally of 16%. However, e expect top-line growth, prudent acquisitions and a healthy capital position to push the shares up in the near term.
Other Insurers Following Suit
Considering the insurance industry’s high available capital, there has been a host of significant acquisitions in the space of late.
Recently, Beecher Carlson Insurance Services, LLC, a subsidiary of Brown & Brown, Inc. BRO, has purchased certain assets of Donald P. Pipino Company. The transaction will not only enable the insurance broker to enhance its service portfolio but also provide a wide range of resources and extended service plus consulting capabilities to its clients.
In January 2019, Horace Mann Educators Corporation HMN closed the buyout of retirement plan provider Benefit Consultants Group and the subsidiary broker dealer and registered investment adviser BCG Securities (announced on Oct 30, 2018). The acquisition will help the Multi line insurer improve its retirement plan offerings for educators and others, providing services to their communities.
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