Ardonagh takes major leap into Asia-Pacific with historic PSC deal

The Ardonagh Group Ltd. has made its biggest bet on Asia-Pacific to date with its pending A$2.26 billion acquisition of Australian insurance broker PSC Insurance Group Ltd.

The cash transaction for A$6.19 per share is the largest deal with a publicly disclosed value in Ardonagh's history. The transaction value at announcement is more than triple what Ardonagh paid to acquire Besso Insurance Group Ltd. from BGC Partners Inc. in 2021.

The transaction signals Ardonagh's commitment to, and growth strategy for, Australia and the wider Asia-Pacific region, according to a spokesperson for the UK broker. Acquiring PSC, which also operates in Hong Kong, Vietnam and New Zealand, will provide Ardonagh with significant opportunities for growth and innovation in the region, the spokesperson said.

Strength in numbers

Ardonagh intends to combine PSC's Australia and New Zealand operations with Envest Pty. Ltd., which it acquired in February 2023, according to the merger release.

The transaction will also strengthen the two insurance brokers' presence in the UK, where PSC has made a number of acquisitions over the years. Ardonagh's position in UK wholesale and retail broking will be further solidified with the transaction, S&P Global Ratings noted. PSC's UK operations will be merged into Ardonagh Specialty and Ardonagh Advisory, Ardonagh said in a merger release.

Fitch Ratings also sees the deal as strategically sound. While the acquisition presents higher execution and integration risks compared with Ardonagh's recent deals, the complementary nature of the combined businesses makes the risks manageable, according to the rating agency.

Rival bids unlikely

Prospects of a higher offer for PSC seem low, according to Jarden analyst Kieren Chidgey, who noted that the proposed deal represents a 29% premium to the investment research provider's previous fundamental valuation of A$4.80 per share.

Media reports also suggest that PSC already fielded interest from US brokers Marsh & McLennan Cos. Inc. and Arthur J. Gallagher & Co., both of which have expanded their footprint in Australia in recent years.

– Read more about M&A activity in Asia-Pacific and North America. – In Play Today highlights potential M&A in the global insurance sector, while M&A Replay presents a summary of recently announced deals. – Access deep dives into insurance transactions across the globe via our Deal Profile feature.

Marsh reportedly expressed interest in PSC early in 2024, but industry observers said the US broker is still in the process of absorbing Honan Insurance Group Pty. Ltd., which was acquired in 2023. Gallagher also looked at PSC but reportedly hesitated because of the price, The Australian reported in April.

If the deal pushes through, PSC would be delisted from the Australian Securities Exchange, the Ardonagh spokesperson confirmed. This will leave Australia with only two publicly traded insurance brokers, AUB Group Ltd. and Steadfast Group Ltd.