HRH Acquires High-End Broker Service

By Mark E. Ruquet

NU Online News Service, May 15, 10:18 a.m.EST?Insurance broker Hilb, Rogal and Hamilton Co. said itwas acquiring Atlanta, Ga.?based Hobbs Group LLC. in a deal worthmore than $240 million.

The Richmond, Va.?based broker, ranked tenth largest worldwide,will be acquiring one of the top 20 brokerage firms in the UnitedStates, adding 27 offices in 15 states to its current 80 offices in22 states.

In a conference call, Andrew L. Rogal, chairman and chiefexecutive officer of HRH, said the acquisition would allow thebroker to enter new markets serving upper middle-market andtop-tier clients, which HRH defines as companies generating $50,000in commission and fee revenue.

To make the deal work, HRH said it would pay a combination ofcash and stock that could be worth $244 million. Completion of thedeal is expected by July 1.

As part of the deal, HRH will assume $55 million in debt. Partof the payment is based on Hobbs attaining certain financialperformance goals over the next two years, which HRH executivessaid they "would be very surprised" if Hobbs did not meet.

For 2001, Hobbs reported revenues of $95.2 million, and HRH saidit expects "strong organic growth in 2002 and beyond."

Timothy J. Korman, HRH's executive vice president, finance andadministration, said Hobbs is the 17^th largest insurancebroker in the country, with $1.7 billion in insurance premiumservice. The firm provides property-casualty insurance services,risk management, executive compensation and employee benefitsservices. Besides bringing new markets to HRH, the deal would alsoadd employee and executive benefit services to its portfolio.

Mr. Rogal said the acquisition, which is part of the firm'sfive-year acquisition strategy, allows the broker to enter marketsmore quickly than if it tried building the business.

Martin L. Vaughn III, HRH's president and chief operatingofficer, said Hobbs opens the door to new lines, and of specialinterest is their executive benefit deferred compensation program.He called it a rapid growth area for the firm.

There are no consolidations being contemplated in the near term,Mr. Rogal said. He said Thomas A. Golub will remain president andchief executive officer of Hobbs. Mr. Golub will join HRH asexecutive vice president and serve on the firm's board ofdirectors, becoming a partner in the firm, Mr. Rogal said.

The acquisition will not interrupt HRH's acquisition strategy orrequire the firm to make a secondary stock offering to complete thedeal, Mr. Rogal said. Mr. Vaughn added that the firm is in aposition to continue to make acquisitions and pay off the debt itis assuming.

"We are not out of the acquisition game," Mr. Rogal said.