AUB Group’s bid to acquire Coverforce Holdings will depend on the outcome of a case before the Supreme Court.

The company said on Friday it had an agreement to buy a 49% stake held by private equity investor Pemba Capital Partners, and intended to also acquire the remainder of Coverforce in a deal expected to be completed in the fourth quarter for around $150-200 million.

But Coverforce management say they hold 56%, that Pemba can’t drive through a sale and the matter will be resolved in court.

AUB CEO Mike Emmett told insuranceNEWS.com.au that company is aware of the legal issues but announced its deal with Pemba following representations that the firm was entitled to complete the sale and given Australian Securities Exchange disclosure obligations.

“We have protections and rights in terms of our due diligence and walkaway rights in the event that it transpires that what they represented isn’t accurate,” he said. “We will obviously honour the court process.”

Mr Emmett says he remains confident the transaction will be completed this year.

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. HarbourVest-owned Pemba has been an investor for seven years and maintains it has “drag rights” that apply to other shareholders.

Coverforce says the dispute with Pemba went before the Supreme Court on Friday morning, and the sale will be strongly resisted by the majority shareholders.

It is expected a hearing might not take place until October, with the court action centring around the contents of disputed shareholder agreements.

“Pemba Capital Partners are minority shareholders of Coverforce Holdings Pty Ltd and do not have the authority to undertake a sale,” Coverforce CEO Jim Angelis told insuranceNEWS.com.au.

“We are also taking advice as to an action for damages against Pemba Capital Partners and AUB Group.”

Mr Angelis is a key shareholder in the company, which has close links with authorised representative firm Resilium.

Small Coverforce holdings are held by Adrian Kitchin, Ben Hastie and Drue Castanelli, who earlier this year completed a management buyout of Resilium. Mr Kitchin is a Coverforce Director.

Mr Kitchin says Resilium remains fully owned by the three and is “not subject to AUB’s unwelcome bid for Coverforce Holdings”.

“We are familiar with the legal proceedings before the Supreme Court and it is our view that the attempted drag by Pemba and acquisition by AUB is ill-conceived at best,” he told insuranceNEWS.com.au.