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updated: 9/4/2013 11:30 AM

A.J. Gallagher will buy UK firm for $370 million

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Bloomberg News

Arthur J. Gallagher & Co., the insurance broker that raised funds in June for acquisitions, agreed to buy the Giles Group of Companies for $370 million to expand in the U.K.

Giles has more than 1,100 employees operating from 43 offices, according to a statement today from Itasca-based Gallagher.

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The deal will add new customers and help the broker provide more services to clients with international operations, Gallagher said. The company, with business in the U.K., Canada and Australia, has been expanding outside the U.S. as it competes with Marsh & McLennan Cos. and Aon Plc, which are the largest brokers. About 20 percent of Gallagher's revenue came from outside the U.S. last year, up from 13 percent in 2010.

"We continue to look for outstanding international partners," Chief Executive Officer J. Patrick Gallagher said in the statement. With the deal, "we can significantly expand our operations in England and Scotland" while adding business in location such as Northern Ireland and Wales.

The deal is expected to generate more than 90 million pounds in annual revenue and be completed next month, Gallagher said. The broker announced the private placement of $200 million in debt in June and said the funds could be used for acquisitions.

The Giles transaction will be financed with free cash and borrowing from a line of credit. Gallagher said it expects to repay the credit line within six months, with the issuance of long-term notes.

Transportation, Health

Gallagher rose 1.4 percent to $41.98 at 10:35 a.m. in New York trading. The broker has climbed 21 percent this year, beating the 16 percent advance of the Standard & Poor's Midcap 400 Index.

Giles is one of the top five independent insurance brokers in the U.K., according to the company's website. The firm acts as a middleman between insurers and buyers for coverage including transportation and health policies.

Gallagher said net consideration is about 233 million pounds after accounting for the value of some acquired assets, including those related to taxes.

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