Private equity firm Hellman & Friedman LLC has clinched a roughly $4.4 billion deal to take over Hub International Inc, Canada's largest insurance brokerage, from Apax Partners LLP, the firms said on Monday.
Apax, a London-based private equity firm, will realize a profit of more than three times what it had originally invested when it acquired Hub in June 2007, according to a person familiar with the financial terms.
The consortium led by Apax that took Hub private, which included Morgan Stanley (MS.N) and Hub's management, had contributed total equity of close to $700 million as part of the $2 billion deal for Hub at the peak of the buyout boom, the person said.
Hellman & Friedman's deal underscores private equity's strong interest in insurance brokers following KKR & Co LP's (KKR.N) $1.8 billion takeover of Alliant Insurance Services Inc from Blackstone Group LP (BX.N) and the $2.3 billion takeover by Onex Corp OCX.TO of USI Holdings Corp from the private equity arm of Goldman Sachs Group Inc (GS.N) last year.
Hub, which provides property and casualty, reinsurance, life and health, as well as employee benefits, has grown through 300 acquisitions of insurance brokerages since its inception in 1998, according to the company's website.
Apax more than doubled Hub's cash flow during its ownership and used much of it to fund the company's expansion in Canada, where it grew from the third-ranked insurance broker to become the biggest, as well as enter new markets such as Brazil.
Reuters in April had reported that Hub was starting to explore a sale.
In addition to having scope to grow Hub through more acquisitions in the fragmented insurance brokerage market, Hellman & Friedman will also be able to charge higher prices following years of falling rates in the insurance industry, according to the person familiar with the deal.
Hub said in a statement that it expected to post revenue of about $1.2 billion in 2013, after the annualized impact of acquisitions. The deal, which values Hub at $4.4 billion, including debt, is expected to be completed before the end of 2013.
Investment funds managed by Hellman & Friedman will hold a majority interest in the Chicago-based company, while members of Hub's senior management will continue to have a significant equity position, the company said.
BofA Merrill Lynch, Morgan Stanley & Co LLC and Stephens Inc provided financial advice to Hub and Apax.
(The story corrects 4th paragraph, corrects to show that Onex Corp bought USI from Goldman Sachs, not that Goldman bought Onex)
(Reporting by Greg Roumeliotis in New York and Tanya Agrawal and Anil D'Silva in Bangalore; Editing by Sriraj Kalluvila, Robin Paxton and Leslie Adler)