PSC would be an attractive target for international broking giants, but the likely price limits the list of potential buyers, analysts say.

As reported in a Breaking News bulletin yesterday, the listed group confirmed it is participating in takeover talks, having received “multiple strategic approaches”. But it says discussions “may or may not lead to an offer being made for PSC”.

Morningstar equity analyst Nathan Zaia says PSC’s announcement “doesn’t really surprise” him.

He says the large Australian broking groups are “well run, highly profitable, cash-generative businesses”.

“Their customers are very sticky, so it’s hard to grow against them,” he told insuranceNEWS.com.au. This makes an acquisition the best way of making a significant impact on the local market.

“The Australian brokers have been consolidating, but there’s every possibility that someone even bigger comes along and takes one of them out.”

Macquarie insurance analyst Andrew Buncombe says one of the best pieces of advice he has been given is that “everybody is always looking at everybody”.

“But where Australian insurance brokers are trading at the moment, the challenge becomes the multiple, and significant synergies would have to be achieved.”

PSC entered a trading halt yesterday before releasing a statement to the Australian Securities Exchange in response to media speculation.

“PSC confirms that it has recently received multiple strategic approaches and is in discussions that may or may not lead to an offer being made for PSC,” it said.

“Strategic discussions always require a period of information sharing and exploration. Consistent with that experience current discussions are subject to due diligence and negotiation and remain incomplete. 

“It is uncertain whether these discussions will lead to any specific outcome.”

The Australian Financial Review earlier published an article claiming PSC had held informal discussions with “at least two offshore insurance companies”, and had hired Goldman Sachs to steer preliminary takeover talks.

The newspaper said PSC would be seeking “a price tag of about $2.3 billion”.

The article named Ardonagh and Gallagher as potential “dance partners”. Industry sources have also pointed to Howden as a contender, while some believe the most likely buyer would be Marsh.

PSC, which was formed in Melbourne in 2006, listed in 2015 and has grown into a diverse insurance group incorporating broking branches, an authorised representative network and joint ventures. It has significant operations in Britain and Hong Kong.

Last month it posted strong first-half earnings. Underlying earnings before interest, tax, depreciation and amortisation rose 12% to $54.2 million and underlying net profit after tax before amortisation grew 6% to $37.1 million.