UK-based Ardonagh says its proposed $2.3 billion acquisition of PSC Insurance Group marks a “significant milestone” in its global growth and will strengthen its position in Australia and Britain. 

As reported in a Breaking News bulletin yesterday, Ardonagh intends to merge PSC’s Australia and New Zealand operations with Envest, which it acquired in February last year, creating a group that places $3.3 billion in gross written premium annually.

PSC’s UK operations will be merged into Ardonagh Specialty and Ardonagh Advisory, further building the group’s position in British wholesale and retail broking. 

Ardonagh has offered $6.19 in cash per share, representing a 27.6% premium to the March 12 closing price. On March 13 PSC advised it had received approaches and was holding discussions that “may or may not lead to an offer being made”. 

The proposed deal implies an enterprise value of $2.4 billion and a multiple of 20.8 times based on the past 12 months, and 18.7-19.4 times guidance. The proposed takeover is through a scheme of arrangements that must be voted on by shareholders and secure court approval. 

MST Marquee analyst Scott Hudson says, from a valuation perspective, the deal is positive and reflects the value PSC offers with a network of broking and underwriting agencies and its wholesale interests. 

“You are getting significant scale and the multiple reflects that scale benefit that PSC would bring to Ardonagh,” he told insuranceNEWS.com.au. 

Envest CEO Greg Mullins will oversee the combined Australia and New Zealand operations, while PSC founder and chairman Paul Dwyer will join the Ardonagh senior management team on deal completion and work with leadership teams in Australia and at Ardonagh Specialty to integrate and grow the combined businesses. 

Mr Mullins says the combined group will deliver long-term value for customers, brokers and agencies. 

“Together with [PSC MD] Tony Robinson and the wider PSC leadership, we believe the scale and footprint we collectively bring to this next chapter is set to create huge opportunities to grow and innovate in the Asia-Pacific region,” he said. “Our clients remain the number one priority for both parties throughout this process.” 

Ardonagh intends to fund the deal with about 50% equity from existing shareholders Madison Dearborn Partners and HPS Investment Partners, and 50% debt including existing and new facilities. 

The PSC shareholder vote is expected to be held in September, potentially allowing the scheme to be implemented that month. The deal is also subject to regulatory approvals. 

“This transaction recognises the quality and strength of PSC’s people and business that has developed over the past 18 years,” Mr Dwyer said. “We believe this transaction maximises value for PSC shareholders while also providing an excellent platform for growth for PSC employees and clients.”  

PSC, which was founded in 2006 and listed in 2015, has more than 40 trading brands and operations in Australia, the UK, Ireland, Hong Kong, Vietnam, New Zealand and Bermuda, employing 900 people and managing more than $2.59 billion in global gross written premium.