Aspen Insurance Holdings Limited has agreed to be acquired by certain investment funds affiliated with Apollo Global Management LLC (APO - Free Report) for $2.6 billion in cash. The deal is expected to culminate in the first half of 2019, subject to closing conditions.
The buyout agreement follows a strategic analysis by Aspen’s board of directors to provide its shareholders with immediate value. The purchase consideration of $42.75 per share represents 6.6% premium to yesterday’s closing price.
Also, partnering with an entity, which has significant knowledge as well as a successful track record in the insurance as well as reinsurance industry space will help the company ramp up its growth profile.
The acquisition will help Aspen leverage Apollo’s resources and expertise in financial services to enhance its underwriting capabilities and proficiency, which along with long-standing client relationships have helped the company solidify its market position. With this transaction, Aspen should be well-poised to further enhance its compelling insurance and reinsurance business portfolio.
Post closure of the transaction, Aspen will become a privately held portfolio company of Apollo Funds.
Chris O’Kane, Aspen’s group chief executive officer, stated that “Under the ownership of the Apollo Funds, Aspen will have additional scale and access to Apollo’s investment and strategic guidance, which will help us to accelerate our strategy and take Aspen to the next level”.
Of late, there has been a trend wherein private equity firms are acquiring companies. It is likely that these equity firms are investing in insurers to accelerate their returns, given the fact that insurers are witnessing a favorable operating environment. Recently, Bain Capital Private Equity LP offered $1.5 billion to buy ESure Group Plc. Earlier this March, French insurer AXA Group inked a mega deal to purchase XL Grout Ltd. for $15.3 billion or €12.4 billion.
Shares of Aspen have gained 1.1% year to date, underperforming the industry’s increase of 5.7%. The company also witnessed its estimates drop 15.6% for 2018 and 20.3% for 2019 in the last 30 days. Aspen carries a Zacks Rank #5 (Strong Sell). However, with optimism surrounding the acquisition, we expect analysts to raise their estimates for driving the Zacks Rank.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Consolidations in the Insurance Space
Considering the insurance industry’s all-time high available capital resource, there has been a conspicuous craze for acquisitions in the space. Recently, The Hartford Financial Services Group, Inc. (HIG - Free Report) agreed to acquire The Navigators Group, Inc. (NAVG) for worth $2.1 billion in cash with a view to expand its business globally. Also, Kemper Corporation (KMPR) has acquired Infinity Property and Casualty Corporation for $1.6 billion to be a market leader in the nonstandard auto insurance space.
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