Australia's PSC Insurance hits record high on $1.5 bln takeover by Ardonagh

PSC Insurance

09/05/2024 03:53

(Repeats to widen distribution with no changes to text)
    By Rishav Chatterjee
       May 9 (Reuters) - Shares of PSC Insurance Group  PSI.AX 
rose to a record high on Thursday after UK-based broking
business Ardonagh Group agreed to buy the Australian company in
a deal valuing it at A$2.26 billion ($1.49 billion) amid rising
confidence in the sector.
    Shares of the Australian insurer gained as much as 5.4% to
A$6.05, while the benchmark index  .AXJO  was down 0.9% after a
five-session rally.
    Global insurance distribution platform Ardonagh will pay
A$6.19 a share, representing a premium of 7.8% to the Australian
firm's last close on Wednesday.
    "The all-cash premium price in the deal highlights the
significance of PSC to Ardonagh in expanding its footprint in
the Australian market," said Hebe Chen, an analyst with IG
Markets.
    Policy prices have been rising globally and locally, and the
Australian insurance market has been a prime target for M&A
activity, with broker March & McLennan taking over Honan
Insurance earlier this year.
    "We think the acquisition may engender more confidence in
the space," J.P. Morgan said in a note, adding that the deal by
Ardonagh implies it is expanding its wings in Australia.
    Analysts at brokerage Jarden raise their price target on the
Australian insurance firm to A$6.19 from A$4.80 and said the
prospects of a higher offer appear low.
    "We now expect PSC shares to trade on newsflow around M&A
rather than fundamentals," Jarden said.
    Ardonagh, which places over $15 billion of premium globally
for its clients and operates in about 30 countries, bought
Australia's Resilium Insurance Broking in early 2021 and Envest
in 2023.
    The UK-based broking business said it would fund 50% of the
deal from shareholders Madison Dearborn Partners and HPS
Investment Partners and the rest from existing and new debt.
     
($1 = 1.5198 Australian dollars)

 (Reporting by Rishav Chatterjee in Bengaluru; Editing by
Subhranshu Sahu)
 ((Rishav.Chatterjee@thomsonreuters.com;))