A Swedish private equity firm’s $5.25 billion bid for listed intermediary group AUB may be no more than a starting point in the sale process, and more buyers could join the hunt, analysts say.

EQT’s offer is “too cheap”, Hunter Green Institutional Broking director Charlie Green says, adding: “I expect it to be competitive now that they have opened the door. I expect the bid for AUB to be contested because it’s so cheap, and now that somebody started the auction, it’s game on.”

He added: “A low-20s [price earnings multiple] is what EQT has pitched. In a relatively low interest rate environment, for such a good company, that’s a relatively derisory multiple.

“I think they’re having a good crack at a good asset. They hope to get bullet-proof earnings on a reasonable multiple and it’s the holy grail for them, but they need to sharpen their pencils.”

As reported, EQT has made an unsolicited bid to acquire AUB at $45 per share.

Morgan Stanley analysts say the offer is a “suitable starting point … We think AUB is a more strategic asset, given its [Australian] market position. We think investors underappreciate the market share gains brokers are delivering. Australian premiums written through brokers are growing as a percentage of the Australian general insurance industry.”

Morningstar says there is no guarantee the deal will proceed but “given the resiliency of earnings and growth opportunities, we think there is a good chance EQT will like what they see”.

The analyst added: “While it would be disappointing to see another high-quality business leave the ASX boards to private equity, at least they’re not bagging a bargain.”

Jarden equity analysts note the proposal’s “ ’no talk’ and ‘no due diligence’ restrictions have a fiduciary exemption that applies after the hard exclusivity period ends, allowing the AUB board flexibility to engage with competing bidders if it receives an unsolicited competing proposal that could be considered a superior proposal”.

The hard exclusivity period ends on Thursday, the Jarden note says. "Terms and conditions provide flexibility for AUB."