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updated: 5/20/2014 10:09 AM

Gallagher to acquire Canadian broker Noraxis

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Wire Reports

Itasca-based Arthur J. Gallagher & Co. will acquire Canadian insurance broker Noraxis Capital Corp. from RSA Insurance Group Plc in a deal worth about $460 million.

Gallagher will pay $400 million for an 87 percent stake in Noraxis, the company said in a presentation on its website. Noraxis management will own the remaining 13 percent. The acquisition is expected to be completed in late July pending regulatory approval.

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Noraxis is a top-five Canadian insurance broker that provides retail commercial, personal and employee benefits insurance products and services. Noraxis generated nearly $125 million in revenue in 2013, has more than 650 employees and operates out of 23 offices across Alberta, Manitoba, New Brunswick, Nova Scotia and Ontario.

"In Noraxis, we have found our ideal Canadian partner and together we now have a solid platform for organic growth and a leadership team that will continue to attract new merger partners," said J. Patrick Gallagher, Jr., Chairman, President and CEO.

RSA Chief Executive Officer Stephen Hester had been seeking to sell assets and bolster capital at London-based RSA since taking over in February. He struck a deal in April to sell units to Poland's PZU SA for about $498 million. The Canada sale is expected to add about $378 million to net tangible assets and be completed within two months, RSA said in a separate statement.

The deal "represents a further development in RSA's plan to focus the business and increase capital," wrote Barrie Cornes, an analyst at Panmure Gordon & Co., in a note to clients. "RSA is doing all the right things, and mostly in the right order."

The Noraxis deal is the latest of a string of global acquisitions for Gallagher. Last month, the company announced a deal to buy brokering operations from Australia's Wesfarmers Ltd. for more than $900 million. Last year, the company agreed to acquire Giles Group of Companies for 237 million pounds to expand in the U.K.

"We are now well positioned in those countries to replicate our successful acquisition strategy of partnering with smaller, family-owned and entrepreneurial agents and brokers," Gallagher said. "In each of the countries, we believe there will continue to be a wave of consolidation opportunities like we are seeing in the United States."

Noraxis Group President Ken Keenan said the two companies share similar strategies and work culture.

"As a business built by acquiring brokers known to be the best in their geography and niche, we share an obvious client-first service ethos and entrepreneurial culture with Gallagher," Keenan said. "Most importantly, our clients can now look forward to accessing Gallagher's global resources and expertise, whilst continuing to receive the high quality and expert service offered from their local Canadian broker and account team."

• Bloomberg News contributed to this report.

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