Equity Firms To Buy Hub For $1.8B

Hub International Limited insurance brokerage said it has agreed to be purchased by private equity capitalists for $1.8 billion.

The deal announced today involves an agreement to be acquired by Apax Partners and Morgan Stanley Principal Investments.

The Chicago-based firm said under the terms of the agreement, shareholders would receive $40 a share.

Hub may still solicit proposals and negotiate with other parties until March 19. If Hub terminates the agreement before April 10 to enter into an alternative deal, the firm would pay a break-up fee of $21 million.

In a statement, Martin Hughes, Hub's chairman and chief executive officer, said the firm was excited that the partners agree with Hub's strategy.

During a conference call held later today, Mr. Hughes said that the price includes a management contribution of $65 million.

"This transaction is the culmination of a lot of hard work and is fair to our shareholders," said Mr. Hughes during the call.

Apax is a private equity firm with $20 billion under management. Apax has offices in the United States, the United Kingdom, Germany, Sweden, Italy, Spain, Israel, Hong Kong and India.

Morgan Stanley is based in New York and is a financial services firm providing banking, securities, investment management, wealth management and credit services.

Hub is the second major public broker to announce it will be acquired by a private equity firm. USI Holdings said last month that GS Capital Partners, an affiliate of Goldman Sachs, would be acquiring the firm for $1.4 billion.

Hub also reported its fourth quarter and year end results.

For the forth quarter of 2006, Hub reported net income of $11 million, up 92 percent, or $5.3 million, from the same period in 2005. Net income per share increase 10 cents, from 17 cents to 27 cents. Revenues were up 20 percent, or $23 million, from $114 million to $137 million. Organic growth was up 3.5 percent.

For the year, net income was up 98 percent, or $25 million, from $26 million in 2005 to $51 million. Net income per share rose 59 cents, from 76 cents to $1.35. Revenues rose 23 percent, or $101 million, from $443 million to $544 million. Organic growth on the year was up 4.9 percent.

During the conference call, management said that organic growth was achieved with a combination of new business and retentions. The company has not benefited from increased pricing in catastrophic risks because that amounts to 1 percent of the business.

Hub said it would pay a quarterly dividend of 7 cents a share on common stock on March 31 payable to shareholders of record as of March 15.

(This was story was updated at 2:30 p.m.)