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AUB says itís buying Coverforce, but management says itís not for sale

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AUB Group says it intends to acquire Coverforce Holdings after reaching agreement with the brokerage’s private equity investor Pemba Capital Partners.

But Coverforce’s management has disputed the deal and says the company is not for sale and AUB’s announcement is “unconscionable”.

AUB said in a statement to the Australian Securities Exchange this morning that it has entered into a conditional agreement with Pemba Capital Partners to acquire its 49% interest of Coverforce and will work with Pemba to effect the purchase of the remaining shares.

It says the deal is due to be completed in the last quarter of the year for around $150-200 million.

But Coverforce CEO Jim Angelis says the company’s management holds a 56% interest in Coverforce, has not approved the deal and the firm is not for sale.

“Pemba Capital Partners are minority shareholders of Coverforce Holdings Pty Ltd and do not have the authority to undertake a sale,” he said.

“The matter is before the Supreme Court this morning and will be strongly resisted by the majority shareholders. We are also taking advice as to an action for damages against Pemba Capital Partners and AUB Group.

“The nature of the case is whether the private equity firm has the ability to enforce such a deal, and they don’t,” Mr Angelis told insuranceNEWS.com.au..

He says Coverforce management will also take legal advice as to an action for damages against Pemba Capital Partners and AUB.

Coverforce was established in 1994 and is the largest privately owned insurance broker in Australia, focusing on the SME, mid-market and large corporate clients.

The business is based in Sydney with branches in Adelaide, Brisbane, Melbourne and Perth.

AUB Group CEO Mike Emmett says the proposed deal is consistent with the group’s strategy of acquiring businesses that accelerate scale and growth and build leverage and expertise, while adding to the firm’s core capabilities.

“I look forward to working with Pemba Capital and all other Coverforce shareholders on the execution of a successful transaction,” he said.

Two years ago Coverforce quit the Steadfast network to join Insurance Brokers Network of Australia (IBNA), which at the time belonged to the AIMS joint venture partnership with AUB’s Austbrokers.

In June IBNA said it was splitting from AIMS and joining Steadfast.

More details in our regulator bulletin on Monday.