USI's Summit Global Deal $113.5M
By Mark E. Ruquet
NU Online News Service, Jan. 19, 4:25 p.m. EST?USI Holdings' purchase of Summit Global Partners Inc. will cost $113.5 million, according to a filing with the Securities and Exchange Commission.[@@]
The Briarcliff Manor, N.Y.-based insurance broker said last week that it had reached a definitive agreement to acquire the Dallas-headquartered broker after announcing its intent to purchase the broker in Sept. 2004.
According to USI's filing, the broker would pay $113.5 million to SGP's stockholders, which may be increased or decreased subject to closing term adjustments. Payment would consist of cash, unregistered shares of USI common stock and promissory notes of payment. A portion of the payment?$15 million?will be paid into an escrow account on the closing date of the merger for certain obligations.
USI said it expects to complete the deal sometime in February.
Established in 1996, SGP specializes in risk management and employee benefits for middle market companies throughout the U.S. with offices in Texas, Florida, Illinois, California, Tennessee, New Mexico and Michigan. SGP is expected to contribute approximately $66 million of revenues to USI on an annual basis.
David Lewis, an analyst with Atlanta-based Suntrust Robinson Humphrey, said the deal is an "attractive acquisition opportunity for USIH and one that should fit in well with their organization."
Suntrust Robinson owns no interest in USI.
Mr. Lewis said payments for acquisitions are usually 1.5-to-2 times book value. SGP is estimated to be about 1.7 times value, falling within that price range. The deal could translate into accretion of 5 cents earnings per share in 2005 for USI, he added.
Last year, among its acquisitions, USI purchased Los Angeles-based Dodge, Warren Peters, a firm that is expected to produce $25 million in revenue.
Last month, USI issued lower earnings guidance for 2004, saying it expected earnings to come in at between 96 cents and 98 cents a share, down from $1.02 to $1.07 a share it announced earlier in the year. The company also announced the lay-off of one percent of its workforce of 2,500 employees. It also planned to sell off three poorly performing operations.
The company blamed the combination of a softening market and overconfidence in the company's ability to attract new business for the move.
Mr. Lewis said that despite lowering its earnings guidance for 2004, the SGP acquisition should help lift the firm's performance.
"Overall, we are enthusiastic about what they have been able to bring in," he noted. "We think 2005 will be a very good year for them."
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