CBL Corporation Ltd (CBL) has announced that it is planning to acquire Securities and Financial Solutions Europe SA (SFS), France’s largest specialist producer of construction sector insurance and CBL’s largest single client
The price is expected to be €94m (A$143m; NZ$151m). Approximately €11.4m of the purchase price would be paid over the two years following completion, subject to adjustment depending on the financial performance of SFS. The acquisition is subject to usual regulatory processes and consents, including change in control from the Luxembourg Insurance Commission, and is expected to complete before the end of October 2016.
CBL Managing Director Peter Harris said the strategic acquisition would assist in removing the distribution concentration risk that SFS represented to CBL in being such a large client, and would further vertically integrate and consolidate CBL’s market position in Europe, particularly in France.
The acquisition would also be expected to bring additional strategic opportunities for CBL. “SFS is complementary to our existing Managing General Agent (MGA) based in the UK, European Insurance Services Limited, (EISL), which also distributes construction sector insurance products in France. SFS and IMS would add significant specialist skills and resources that would enable CBL to grow both businesses” said Mr Harris.
SFS is a leading MGA, writing specialist construction sector insurance products on behalf of insurers in France and has recently opened branches in Spain and Luxembourg. As an MGA, SFS does not bear any insurance risk and earns revenue from brokerage and fees. IMS is a claims management business that manages the claims for SFS and other third party clients, and earns revenue from claims management fees.
SFS had net revenue of €41m in 2015 and operating earnings of €8.2m on a normalised basis. The acquisition would be expected to be earnings accretive in the first full year of ownership by CBL.
The acquisition would be funded by a combination of cash, bank and vendor funding.
Brexit update
CBL also confirmed that Brexit is not expected to affect its European business. CBL's European insurer is domiciled in Ireland, which is not affected by Britain's decision. Further, CBL’s European Insurance Services Ltd, which is based in Tunbridge Wells UK and writes business in France, plans to continue operating and shift its legal domicile, probably to Ireland.
Investor conference call
Following the announcement in relation to the planned acquisition, investors and analysts are invited to participate in a briefing with Managing Director Peter Harris and Chief Financial Officer Carden Mulholland on Thursday 30 June 2016.
CBL will provide the market with an investor presentation in relation to the planned acquisition prior to the briefing. The briefing will be via a teleconference facility and there will be the ability for investors and analysts to ask questions
Teleconference details are:
Date & time: Thursday 30 June, 9am Australian Eastern Daylight time (11am New Zealand time)
Dial-in numbers: Australia: +61 291510246 (New Zealand: +64 99127791)
Participant passcode: 12718170 then #