PERTH-based conglomerate Wesfarmers has offered few clues on any major acquisitions after pocketing at least $1bn on the sale of its insurance broking business.
The sale to US-based broker Arthur J Gallagher was announced this morning.
One theory among investors is that Wesfarmers could merge its chemicals division with Orica in a deal that could be worth almost $9bn.
But managing director Richard Goyder wasn’t commenting on speculation this morning, saying only that the sale was part of the company’s focus on disciplined portfolio management.
Wesfarmers had been working with investment banks Macquarie Group and JPMorgan on options for the insurance broking business, OAMPS, which included a sharemarket float or a trade sale.
Analysts said last month OAMPS had an earnings-to-enterprise-value ratio of 16.6 times and a price-earnings ratio of 18.4 times for the 2015 financial year.
In December, Wesfarmers agreed to sell its insurance underwriting arm to Insurance Australia Group for $1.85bn in the biggest financial services deal of the year.
In a statement to the Australian Securities Exchange, Wesfarmers said it would also receive a distribution of $150 million to repay funding of the premium funding operations.
The retailer expects to record a pre-tax profit of approximately $310m to $335m on the sale of OAMPS Insurance Brokers Australia, OAMPS UK, Crombie Lockwood in New Zealand, Lumley Finance and Monument Premium Funding.
The sale is subject to approval from the Foreign Investment Review Board and regulatory bodies in the United Kingdom and New Zealand.
Wesfarmers said the sales to IAG and Arthur J Gallagher constitute the entire operations of its insurance division and in aggregate are expected to provide pre-tax proceeds of approximately $3bn and result in a pre-tax profit of approximately $1.01bn to $1.085bn.
"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.
Source The Australian
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