Hub International Being Bought for $1.8 Billion; $40 per Share

Hub International Limited, which got its start in 1998 when 11 Canadian brokers merged and has since grown through acquisitions into one of the largest insurance brokers in North America, is being acquired by funds advised by Apax Partners together with Morgan Stanley Principal Investments in a transaction worth $1.8 billion.

Hub shareholders will receive $40.00 per share in cash, representing a premium of 28 percent to the 90-trading day average closing stock price on the New York Stock Exchange. This transaction values Hub at approximately $1.8 billion, which includes approximately $1.7 billion of fully diluted equity and approximately $145 million of debt.

There is no financing condition to consummate the transaction. The transaction will be financed through a combination of equity contributed by Apax, MSPI and members of management, and debt financing that has been committed by Morgan Stanley and Merrill Lynch & Co. Senior members of Hub’s management team have already committed to invest in excess of $65 million of equity in the transaction. Morgan Stanley and Merrill Lynch & Co. will act as joint lead arrangers and joint bookrunners on the acquisition financing. The transaction is expected to be completed toward the end of the second quarter of 2007

Under the agreement, Hub may solicit proposals for alternative transactions from third parties until March 19, 2007 and will be permitted to continue negotiating with parties that have submitted proposals prior to such time. If Hub gives notice to terminate the agreement before noon on April 10, 2007, to enter into an alternative transaction, Hub would be obligated to pay a break-up fee of 1.25 percent of the equity value of the transaction (approximately US$21 million). However, there can be no assurance that this process will result in an alternative transaction. Hub does not intend to disclose developments with respect to the solicitation process unless and until its board of directors has made a decision.

The board of directors has unanimously approved the transaction. Merrill Lynch & Co. and Scotia Capital each provided a fairness opinion. The transaction is subject to shareholder approval, Canadian court approval, and other regulatory approvals including merger notification filings in the United States and Canada, as well as customary closing conditions.

Headquartered in Chicago, Hub International Limited provides property and casualty, reinsurance, life and health, employee benefits, investment and risk management products and services. Its organization is structured around large regional “hubs” with satellite offices strategically located throughout the United States and Canada.

In 1998, it reported net earnings of $1.7 million on revenue of $38.7 million. Through the years it pursued acquisitions of brokerages, buying
44 in 1999; 18 in 2000; 16 in 2001; 8 in 2002; 9 in 2003; 7 in 2004 including the $100 million Talbot acquisition; 15 in 2005 and 3 in 2006.

In 2002, Hub’s U.S. initial public offering raised $88.1 million.

In 2006, Hub’s market capitalization (total shares x price/share) passed $1 billion for the first time. HUB raises $114.9 million in a secondary offering of common shares.

Full year 2006, Hub reported revenue of $543.9 million, which represented a $101.3 million, or 23 percent, increase over 2005 revenue of $442.6 million. Full year 2006 net earnings of $50.9 million represented a $25.2 million, or 98 percent, increase over 2005 net earnings of $25.7 million. Full year 2006 diluted earnings per share of $1.35 represented a $0.59, or 78 percent increase over 2005 diluted earnings per share of $0.76.

“We are excited that our new partners believe in our commitment to investing in our people and are dedicated to working with us to deliver the most value for our clients and colleagues,” said Martin Hughes, Hub’s chairman and chief executive officer.

Apax is a private equity firms with $20 billion of funds under management and offices in the United States, the United Kingdom, Germany, Sweden, Italy, Spain, Israel, Hong Kong and India. In the last 10 years Apax funds have invested more than $1.3 billion of equity in the sector, including in companies such as Farmafactoring, Travelex, Azimut, Global Refund and Intralinks.

Mitch Truwit, partner at Apax and head of Apax’s Financial & Business Services Group in the United States, said his form was attracted to Hub for its management talent. “From the outset, this transaction has been grounded in the opportunity to invest and partner with one of the best management teams in the industry,” he said.

Source: Hub International
www.hubinternational.com