Austbrokers has purchased a 77.1% shareholding in major corporate broker and Steadfast member InterRISK Australia Pty Ltd.

The $15.7 million acquisition was announced a few minutes ago on the Australian Securities Exchange, and comes on the eve of the Steadfast extraordinary general meeting to decide whether to proceed with a public listing.

Under the acquisition, Austbrokers has agreed to provide InterRISK shareholders 193,348 new fully paid Austbrokers ordinary shares and cash consideration of $13,849,149 implying a total value of $15,743,930 subject to certain completion account adjustments.

The cash component of the consideration will be funded from Austbrokers’ existing cash reserves and existing finance facilities. Austbrokers’ gearing after this transaction will be less than 20% and the transaction is wholly within banking covenants.

While Austbrokers will only recognise the June performance of this investment in the current financial year, based on conditions and performance to date, this transaction is anticipated to increase Austbrokers’ earnings per share by approximately 3% after financing costs on an annualised basis.

The ASX statement says InterRISK is “recognised in the industry as a leading mid-tier operator in the corporate and large industrial sectors, boasting well-known organisations as part of its client base including many ASX top 200 companies”.

InterRISK has more than 60 staff in offices in Sydney, Melbourne and Brisbane and provides insurance and risk management services locally and globally.

MD Dennis Guy said InterRISK management has been considering its future shareholding strategy for some time, “and as part of that review engaged with Austbrokers and others to consider our options”.

“In the end, Austbrokers developed a tailored approach that best met the needs of all our shareholders both now and into the future. Their proven ‘owner-driver’ partnership model and their professional approach throughout our negotiations were a major factor in confirming our move to Austbrokers. 

“I am now confident that the platform for our staff, clients, suppliers and shareholders has been further enhanced and we are looking forward to partnering with Austbrokers into the future.”

The purchase by Austbrokers has enabled the private equity shareholders of InterRISK to exit the business, while Mr Guy and the existing executive/management team will continue as shareholders.

Austbrokers CEO and MD Mark Searles says InterRISK is “a solid business with a notable list of clients”.

“Given the size of their operation we undertook extensive due diligence and were impressed with the growth and profitability of the business in addition to the evident high levels of professionalism.

“We welcome the team at InterRISK into the Austbrokers family. We are confident that we will be able to introduce a number of our proven business enhancers and work with the company to continue to improve their operations and grow their business.”

Describing the acquisition as a “substantial win” for Austbrokers, Mr Searles told insuranceNEWS.com.au Austbrokers “will continue with our aggressive growth strategy”.

“I believe we offer an attractive alternative to brokers seeking a progressive future,” he said. “With our A&I Member Services joint venture with IBNA, we are able to offer a range of full equity and non-equity alternatives. We will continue to be active in the market.”

The acquisition has added more than $80 million of profitable gross written premium to the network and increased its presence in the mid-market and corporate sectors.

“It also gives us greater capacity in the Lloyd’s market,” Mr Searles said.

“With InterRISK on board, the Austbrokers network will build on its existing expertise in the corporate insurance arena which will be leveraged for the benefit of all our stakeholders.

“Having recently completed my strategic review of the Austbrokers business I am pleased with the acquisition of InterRISK as it ‘ticks the box’ of a number of strategic pillars including diversification of income, acquisition growth, future organic growth and building of talent bench-strength.”

This transaction takes the Austbrokers group’s acquisition count to 15 this financial year and closely follows the recent acquisitions of Lawsons Underwriting and Guardian Underwriting Agencies.

The InterRISK acquisition means Austbrokers now has equity interests in 45 broking and financial services businesses, in addition to 13 underwriting agency businesses.

More details in our regular bulletin on Monday.