By Michael Loney

June 11 - (The Insurer) - Brown & Brown has launched a $4 billion aggregate offering of common stock to help fund its $9.4 billion acquisition of Risk Strategies parent Accession.

The public offering of 39.2 million shares of its common stock, par value $0.10 per share, has been priced at $102.00 per share.

The offering is expected to close on June 12, with the underwriters granted a 30-day option to purchase up to an additional $400 million in shares at the public offering price.

JP Morgan and BofA Securities are acting as lead book running managers of the offering.

Brown & Brown expects the net proceeds of the offering will be approximately $3.9 billion.

The acquisition of Accession was announced on Tuesday, and is expected to close in the third quarter.

Accession posted pro forma revenue of $1.7 billion for 2024, an increase of 17% over 2023.

On an investor call on Tuesday, Brown & Brown CEO Powell Brown suggested that the acquisition of Accession “will be a major step in our journey to the next intermediate goal of $8 billion and beyond.”

Brown & Brown expects to fund the acquisition through the issuance of $4.0 billion of new senior unsecured notes, $4.0 billion of new equity, $1.3 billion of equity delivered to Accession's management and private equity sponsors, and cash on hand.

Moody’s assigned a Baa3 rating to Brown & Brown's proposed new senior unsecured notes, and changed Brown & Brown's rating outlook to stable from positive based on the increased financial leverage and integration risk associated with this transaction.

The rating agency said the pending acquisition will boost Brown & Brown's revenue by about 25% and expand its industry and product capabilities across the U.S.

“Offsetting these benefits, we estimate that the acquisition financing will lift Brown & Brown's debt-to-Ebitda ratio by more than a turn to about 3.5x, while reducing its (EBITDA - capex) interest coverage toward the mid-single digits from the upper single digits,” Moody’s said.

S&P Global Ratings affirmed its BBB-minus long-term issuer credit rating on Brown & Brown and maintained its stable outlook. It also assigned a BBB-minus issue level rating to the $4 billion of new senior unsecured notes.

“The stable outlook reflects our view that Brown & Brown will deleverage in line with our base-case forecasts and maintain favorable performance as it successfully absorbs and integrates the acquisition,” S&P said.

“We view Brown & Brown's acquisition of Accession favorably from a business perspective,” it added.

S&P expects Accession's spread and capabilities across commercial lines, employee benefits, personal lines and specialty solutions will complement and bolster Brown & Brown's existing product suite.

The rating agency highlighted Accession’s “historically healthy profitability – including average organic growth in the mid to upper single digits and margins of about 35% over the past three years.”

S&P said that Brown & Brown's credit metrics will weaken considerably after the transaction, “but we expect them to improve rapidly.”