Gallagher CFO: Later AssuredPartners close won’t delay deal economics

Reuters
21 Mar
Gallagher CFO: Later AssuredPartners close won’t delay deal economics

By David Bull

March 21 - (The Insurer) - Arthur J Gallagher CFO Doug Howell has said the hold up to the closing of the intermediary's $13.5 billion AssuredPartners deal for regulatory approval is not expected to delay the economic benefits with the cost of waiting offset by growth in Ebitda in the coming months at the broker it is buying.

On February 7, Gallagher said it had received a request for additional information as part of a regulatory antitrust review into the acquisition as it pushed back the expected close of the transaction from Q1 to the second half of 2025.

In a statement, the Rolling Meadows, Illinois-based intermediary said the request came as part of the Hart-Scott-Rodino filing related to the deal.

During a special call with investors Thursday, Gallagher was asked about the revised timing of the deal and the potential financial impact from the delay.

Howell said: “I don’t think it delays the economics. If you think it costs us 20 million bucks a month to sit on it for a little bit, and if you think we’re delayed six months – I’m going to make that up – maybe if you want to factor all that into our pricing, it adds $100 million of effective purchase price differential.

“On the other hand, they’re growing, so we’re going to get more Ebitda as a result of that. So I would say… it doesn’t change the terrific economics that we got on the deal.”

He added that the AssuredPartners business is performing in line with Gallagher, and that there is no indication of “significant or any” producer departures.

Howell said both sides are “actively engaged” in complying with additional information requests from the Department of Justice in relation to the HSR filing.

“We’re making terrific progress on that,” he continued.

He told analysts that Gallagher has already received HSR approval on its Woodruff Sawyer acquisition, which was first reported by The Insurer last month.

And he said that the agreement with AssuredPartners does allow it to continue its M&A strategy, while AssuredPartners is also actively looking at acquisitions.

Gallagher has a global pipeline that includes 45 potential mergers with more than $400 million of annualized revenue.

Howell said that the information requests will take a while to respond, with a 30-day clock starting after the information has been provided.

The current expectation is that the deal will close sometime in the fall, said the executive.

NO INDICATION OF COMPETITION ISSUE

Also on the call, Gallagher chairman and CEO Pat Gallagher said that while the company was “surprised” to receive a second request for information from the DOJ, “they are fairly common for larger transactions”.

“It makes some sense from a regulatory perspective to just say, 'Could we please take a look at this,' and the way they do that is to send a second request,” he commented.

The executive said that his company’s view across its book of business and that of AssuredPartners “doesn’t show any place that we can see that it would be anticompetitive."

“We’re not really perplexed. They haven’t given us any indication that (they’re) concerned about this level or that level of ownership of premium, income or revenue. So it’s just a matter of trying to fill out for them the requests that they’ve given and just strictly keep hitting it right down the middle of the fairway,” he continued.

AssuredPartners generated $2.9 billion of pro forma revenue for the trailing 12 months ended September 30, 2024.

Separately on the call, Gallagher reiterated the company’s 2025 expectations for 2025, with full-year organic revenue growth projected to be in the 6% to 8% range in brokerage and risk management with an unchanged margin outlook.

Commenting on insurance market conditions, the company’s chairman and CEO said: “We continue to see broad-based renewal premium increases that's both rate and exposure combined, across all of our major geographies and most product lines.

“In our view, carriers continue to behave rationally and are looking to grow in lines where there is an acceptable return while seeking rate increases where it's most needed to generate an underwriting profit.”

KBW analyst Meyer Shields said that based on an October 1 close of the AssuredPartners deal he was raising his forecasts for 2026 earnings per share from $13.55 to $13.65 assuming faster brokerage organic growth and a higher brokerage Ebitdac margin in 2025.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Most Discussed

  1. 1
     
     
     
     
  2. 2
     
     
     
     
  3. 3
     
     
     
     
  4. 4
     
     
     
     
  5. 5
     
     
     
     
  6. 6
     
     
     
     
  7. 7
     
     
     
     
  8. 8
     
     
     
     
  9. 9
     
     
     
     
  10. 10