AUB Group has a positive earnings outlook, and the fact private equity suitors are not proceeding with a takeover is no cause for alarm, a Morningstar research report says.

The analyst says no reason has been given for the deal fizzling, but AUB’s statement that it believes $45 a share appropriately values the group may imply the private equity firms wanted to negotiate a lower figure.

Swedish firm EQT partnered with CVC Asia-Pacific on a joint bid, but AUB said on Monday the parties had agreed to end discussions and the consortium would not proceed with the proposed price of $45.

The shares, which traded at $32.10 before news of private equity interest emerged in October, slumped as much as 18% after Monday’s announcement. The stock was at $32 this morning.

Morningstar says the stock is undervalued.

“We view AUB as an above-average company with a positive earnings outlook, which means shareholders who brought in recent weeks likely just need to wait longer to be repaid,” it says. “Private equity suitors not proceeding does not mean they found red flags.”

JP Morgan says there are several possibilities for why the deal collapsed, but the consortium finding something it did not expect is “less likely for a business like this”.

It may have been that, from the beginning, the suitors were intending to see the assets and lob a lower bid, it says.

“Clearly, the takeover premium that had boosted AUB’s share price will disappear at least in the near term.”

AUB on Monday confirmed earnings guidance and said it sees significant opportunities to grow profits next fiscal year and beyond. 

JP Morgan says the broker space has navigated soft cycles in the past and “current pressures are not pressing enough to pressure profits”.