Equity Firms To Buy Hub For $1.8 Billion

Hub International Ltd. insurance brokerage announced last week that it has agreed to be purchased by private equity capitalists for $1.8 billion. The deal involves an agreement to be acquired by Apax Partners and Morgan Stanley Principal Investments.

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

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, however, 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 brokerage firm was excited that the partners agree with Hub's strategy.

During a conference call, Mr. Hughes said 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," Mr. Hughes said 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, based in New York, 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 last week.

For the forth quarter of 2006, Hub reported net income of $11 million, up 92 percent from the same period in 2005. Net income per share increased 10 cents to 27 cents. Revenues were up 20 percent to $137 million, although organic growth was up only 3.5 percent.

For the year, net income nearly doubled--up 98 percent to $51 million. Net income per share rose 59 cents, from 76 cents to $1.35. Revenues were up 23 percent to $544 million, while organic growth for the year rose 4.9 percent.

During the conference call, management said 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 firm's book of 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.

Hub was founded in 1998 with the merger of 11 Canadian brokerage firms. After a series of acquisitions, it established its corporate headquarters in Chicago in 2001. It began trading as a public company on the Toronto Stock Exchange in 1999 and the New York Stock Exchange in 2002.