Perth-based conglomerate Wesfarmers is in exclusive negotiations to acquire Lumley Insurance Group.

In a statement released early this afternoon, Wesfarmers CEO Michael Chaney said his company expects to purchase parent company Edward Lumley Holdings Limited for $320 million.

The sale will involve all Lumley operations in Australia and New Zealand, comprising general and life insurance businesses, as well as its associated finance and IT activities.

Wesfarmers will operate Lumley in parallel with its rural and small business insurer Wesfarmers Federation Insurance (WFI), and doesn’t expect many employee changes.

“WFI’s direct distribution model is considered to be highly complementary to the broker distribution model adopted by Lumley,” Mr Chaney said. “As a result of the complementary distribution channels and the different product offering of the businesses, few employee changes are anticipated.”

The purchase doesn’t include Edward Lumley’s insurance and related businesses in the UK and Ireland. The acquisition price of about $320 million will buy all the shares in Edward Lumley Holdings, which Wesfarmers said is a premium of about $110 million over projected net assets at completion.

Wesfarmers will also assume the group’s external debt of some $55 million. The price is subject to adjustment for the level of net assets upon settlement of the acquisition.

The acquisition will be subject to Australian Prudential Regulation Authority approval, changes to the corporate structure to facilitate Australian ownership and finalisation of due diligence and sale terms. Wesfarmers said these matters will be resolved “early in the next financial year”.

The gross written premium from Edward Lumley Holding’s Australian and NZ general insurance operations in 2001/02 was about $580 million.  This has been expected to increase significantly in the current financial year.