AUB Group and MGA Whittles Group wish to revisit the proposal as and when practicable and are said to be firmly committed to the existing partnership in the meanwhile
COVID-19 crisis hits AUB Group, MGA Whittles Group deal. (Credit: aymane jdidi from Pixabay)
AUB Group said that it will not move ahead with the closing of a previously announced AUD140m ($85.92m) acquisition of an additional 50.1% stake in MGA Whittles Group due to the impact of the prevailing COVID-19 pandemic.
The equity-based Australian insurance broker network was to take full ownership in MGA Whittles Group through the transaction, which was announced last month. The company currently holds a stake of 49.9% in the Australia-based MGA Whittles Group, which is made up of MGA and the Whittles Group.
MGA is an Australia-based insurance broking which provides broking and risk advisory services, while Whittles offers complementary services to the strata and property management industries.
AUB Group said that it will not be paying the cash consideration of AUD29.1m ($17.86m) nor will be issuing its 8,764,996 shares as part of the transaction to MGA Whittles Group. The company further said that it doesn’t have to repay MGA Whittles Group’s existing debt facilities, which would have been necessary had the deal been closed.
AUB Group, MGA Whittles Group to revisit the proposal at an appropriate time
However, the parties wish to revisit the proposal as and when practicable and are said to be firmly committed to the existing partnership in the meanwhile.
AUB Group said that its board and management have been studying the impact made by the COVID19 pandemic on the financial results and its resources.
The company stated: “The performance of the Group in 1H20 was strong, leading AUB to upgrade its FY20 earnings guidance as announced to the market on 25 February 2020. The Group continues to make significant progress against FY20 Strategic Initiatives with the aim of driving improved long-term earnings growth.
“However, in light of recent developments and the rapidly changing market conditions resulting from the COVID-19 pandemic, the Board considers it prudent to withdraw earnings guidance at this time. Given the evolving situation, AUB is not in a position to provide an estimate of the financial impacts of the COVID-19 pandemic on the Group’s results.”
Last month, the insurance broker network also signed a deal to acquire a 40% stake in BizCover for AUD132m ($81m) plus a working capital adjustment expected to be AUD3m ($1.8m). BizCover is an online insurance distribution platform that digitally generates multiple insurance quotes to give customers the ability to buy cover instantaneously.