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Ardonagh's PSC deal produces ‘good price for the sellers’

Ardonagh has paid an attractive price to secure the acquisition of PSC Insurance Group as the outlook remains positive for broking companies, analysts say.

As reported in a Breaking News bulletin last Wednesday, UK-based Ardonagh plans to acquire PSC for $2.3 billion, offering $6.19 in cash per share. 

The price represents a 25.9 to 27.2 multiple based on forecast net profit after tax before amortisation, and a 27.6% premium to the closing price on March 12, which was the day before PSC confirmed it had received offers. 

A JP Morgan research note says Steadfast has been trading on a price-to-earnings multiple of about 20 times and AUB Group at about 18 times.

“It is a good price for the sellers and is a significant premium to where the brokers have been trading,” analyst Siddharth Parameswaran told “It shows the confidence the capital markets have in brokers and suggests the whole space should be seen reasonably favourably.” 

Ardonagh, whose private equity shareholders are Madison Dearborn Partners and HPS Investment Partners, last year acquired Envest, which now includes the previously purchased Resilium portfolio. 

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 wholesale interests.  

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

Ardonagh intends to merge PSC’s AustraliaN and New Zealand operations with Envest, 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.  

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.  

Morningstar says the acquisition price represents a 19% premium to its standalone valuation of $5.20 for PSC, which it estimates accounts for 3% of the intermediated general insurance market in Australia by GWP. 

PSC is the third-largest independent insurance broker network in Australia and New Zealand and has earnings upside. Gains in premiums and policyholder numbers are driving organic growth, with support from an acquisition strategy, Morningstar analyst Nathan Zaia says. 

“We expect the general insurance pie to grow with single-digit premium increases and [the] intermediated general insurance market to take share as corporates look to navigate rising policy prices,” he said. 

The proposed takeover is through a scheme of arrangement that requires shareholder approval. The deal has the unanimous recommendation of the PSC board and a shareholder vote is expected in September. The acquisition is also subject to court and regulatory approvals.  

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 GWP.  

JP Morgan notes there could be more acquisition interest in the broker space given levels of activity. Marsh last year bought Honan and Arthur J Gallagher has completed deals.  

“Competition considerations may make it difficult in our view for an established international broker with domestic operations to consider dominant domestic players,” it says.