Wesfarmers was well advanced with plans to sell its insurance broking companies through a public listing when US-based global broker Arthur J Gallagher (AJG) initiated talks to buy the assets, reliable sources have told insuranceNEWS.com.au.

Under the deal announced this morning, AJG will buy OAMPS in Australia and Crombie Lockwood in New Zealand, plus their associated premium funding operations, for $1.01 billion.

They will be managed as a united operation by present Wesfarmers Insurance Broking Executive Chairman Steve Lockwood, who today urged staff in the two broking companies to “get behind” the new arrangements, “which is the best possible outcome for staff and clients”.

Mr Lockwood will move across to Arthur J Gallagher as CEO of Property/Casualty Brokerage Operations in Australasia. It is understood no other management positions in AJG’s present Australian operations will be affected.

He told insuranceNEWS.com.au today the sale to AJG “will produce an Australasian broking company sharing experience and expertise, rather than two separate companies operating in silos”.

The combined Australasian operation – including claims specialist Gallagher Bassett, which it is understood will be managed separately – will employ about 2500 people.

“That makes us a very formidable contender in Australia and New Zealand,” Mr Lockwood says in a note to Australian and New Zealand staff that has been obtained by insuranceNEWS.com.au.

He says that after researching AJG and meeting President and CEO J Patrick (Pat) Gallagher Jr and senior managers, he has concluded “they run a very big company but at heart they are brokers. They obviously ‘get’ the business and what running a successful broking business is all about.”

Noting that AJG is the fourth-largest global broker with revenue of nearly $US3 billion ($3.23 billion) and a market capitalisation of about $US6.5 billion ($7 billion), Mr Lockwood adds: “Like us they don’t make a big deal about their size, and Pat [Gallagher] talks more about the single client experience delivered through quality people”.

He says AJG completed more than 30 acquisitions last year and is growing rapidly in the UK market, and now Australasia. “They are very much a global company and exactly the kind of company we want to attach to.”

Urging staff not to “waste any energy on whether this is the right thing to do – it is”, Mr Lockwood encourages them to “get behind it… and have some fun with the challenges and opportunities that lie ahead”.

Wesfarmers expects to book a pre-tax profit of $310-380 million on the sale of the broking and premium funding businesses.

MD Richard Goyder says in a statement that the sale is “in the best interests of our shareholders while offering the customers and employees of our insurance broking and premium funding businesses the opportunity to join a leading global insurance broking business with ambitions to expand in Australia and New Zealand”.

The sale of the group’s underwriting businesses to IAG and AJG are expected to provide Wesfarmers with pre-tax proceeds of about $3 billion and result in a pre-tax profit of up to $1.08 million.