Insurance Australia Group is to further expand its UK presence through the acquisition of UK motor insurer and broker business Equity Insurance Group, for a total purchase price of A$1.4 billion.
The Australian insurance company also stated that it would undertake an underwritten equity placement of A$600 million to fund the acquisition, sourced from a share purchase plan, internal funds and subordinated debt.
Equity operates through two key businesses, Equity Insurance Brokers and Equity Red Star, Lloyd’s largest motor insurance syndicate.
Michael Hawker, CEO of Insurance Australia Group (IAG) said: Equity is an ideal fit with our acquisition criteria in stable yet profitable markets like the UK – it’s a motor-led insurance business with consistently high margins in its markets and a strong management team.
According to Mr Hawker, the purchase to be earnings per share accretive immediately, with a 10% increase in the 2008 financial year.
The acquisition closely follows IAG’s purchase of Hastings, another British insurance company, in September 2006. The purchase of both companies will provide IAG with a strong platform for further expansion in the UK.
The deal is subject to the approval by the appropriate regulatory body and is expected to close by the end of the first quarter of 2007.