Insurance Australia Group (IAG) is set to acquire the insurance underwriting businesses of Wesfarmers in a $1.85bn deal, a move that will fortify IAG’s position in Australia and New Zealand.
The acquisition includes Wesfarmers’ underwriting companies that are trading under the WFI and Lumley Insurance brands, along with a ten-year distribution agreement with Coles.
IAG managing director and chief executive officer Mike Wilkins said the acquisition is a compelling strategic fit for IAG.
"This is a unique opportunity, which is expected to deliver significant long term value for IAG shareholders and unlock further growth potential for our businesses in Australia and New Zealand," Wilkins noted
The proposed acquisition is expected to provide modest earnings per share (EPS) accretion in its first full year of ownership, and at least 5% accretion in the second year.
"Wesfarmers’ underwriting operations are highly complementary to our existing intermediated businesses in Australia and New Zealand and will be integrated with our CGU and NZI operations," Wilkins added.
The completion of the deal, which will be funded through a combination of ordinary equity, subordinated debt and internal funds, is subject to all required regulatory approvals and is expected in the Q2 of calendar 2014.
Image: The acquisition includes Wesfarmers’ underwriting companies. Photo courtesy of adamr/ FreeDigitalPhotos.net.