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‘Hot property’: PSC in discussions with potential buyers

Australia’s large broking companies are “hot property”, but the extraordinary success they have achieved over the past few years could restrict the number of potential acquirers, analysts say.
As has reported, PSC last week 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”.
Possible buyers are believed to include UK based Ardonagh or Howden, which have both made significant moves into the local market, or US giants Marsh or Gallagher.
“Absolutely our brokers are hot property for international players,” one analyst said, adding that even the likes of Steadfast would not be beyond the reach of the biggest global players.
“They have a long-term history of profitable growth. This is largely off the back of premium rises but there is no sign of this stopping.
“There has been a lot of consolidation already in the industry, so international acquirers would not have to make lots of smaller acquisitions.”
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 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 last week 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.
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.