Wesfarmers has agreed to sell its insurance broking arm for $1.01 billion, marking an exit from the industry for the company.
Wesfarmers has agreed to sell its insurance broking arm for $1.01 billion, marking an exit from the industry for the company.
Wesfarmers said it would sell its insurance broking and premium funding operations to New York-listed Arthur J. Gallagher & Co, and that it expected a pre-tax profit on sale of about $310 million to $335 million
The transaction with the Illinois-based company, which employs more than 16,000 people in 25 countries, includes insurance brokerages OAMPS Insurance Brokers and Crombie Lockwood and the premium funding operations Lumley Finance and Monument Premium Funding.
Wesfarmers, which is best known for its Coles, Kmart, Bunnings Warehouse and Target businesses, said it would also receive about $150 million for repayments to the premium funding operations.
The decision to divest the insurance arm follows a December announcement in which the company said it had agreed to sell its Australia and New Zealand underwriting divisions to Insurance Australia Group for $1.85 billion.
Wesfarmers said the two transactions are expected to provide the company with pre-tax proceeds of approximately $3 billion and result in a pre-tax profit of between $1.01 billion to 1.08 billion.
Wesfarmers managing director Richard Goyder said the sale was in line with the company’s focus on disciplined portfolio management in regard to shareholder’s long-term interests.
“We believe this sale agreement with Arthur J. Gallagher & Co. is in the best interests of our shareholders while offering the customers and employees of our insurance broking and premium funding businesses the opportunity to join a leading global insurance broking company with ambitions to expand in Australia and New Zealand,” Mr Goyder said.
OAMPS has been part of Wesfarmers since 2006, Crombie Lockwood and Monument Premium Funding since 2007 and Lumley Finance since 2003.
The Wesfarmers insurance brokerage operations generated $331 million in revenue for the year ending June 30, 2013 and employ about 1,700 people in more than 50 offices in Australia, New Zealand and the UK.
Arthur J. Gallagher & Co chairman, president and chief executive J Patrick Gallagher Jr said the company would become one of Australia’s largest insurance brokers following the sale.
"This acquisition represents an important strategic step for our company by significantly expanding our presence in Australia and New Zealand. Together we will have a tremendous platform for growth as we expand throughout Australasia,” Mr Gallagher said.
Steve Lockwood will lead Gallagher's property/casualty insurance brokerage operations in Australasia and will report directly to Tom Gallagher, head of Gallagher's international operations.
The sale is subject to approval from the Foreign Investment Review Board and other conditions.
