Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
I was hoping to get your thoughts on AUB and RIC. AUB following their recent pullback after a takeover fell through, and RIC following their purchase of Incitec’s fertiliser business. I’m hoping one or both could provide reasonable returns over a 1-2 year period. Many thanks for all your excellent work, Mark
Hi Mark,
AUB Group Ltd (AUB): AUB plunged over 20% this week after the private equity consortium of EQT/CVC walked away from their $45 bid for the insurance broker and underwriting agency.
Concerns during due diligence saw the change of heart with issues likely around growth prospects, premium-growth moderation, or broker-retention risk in AUB’s business but no specific reasons were given. This shouldn’t come as a major surprise with both EQT and CVC in the past having launched bids and then pulled out after/during due diligence, suggesting an if in doubt walk away approach.
The board were happy with the $45 approach but today the stocks back ~$32, where it’s been trading for most of the last 2-years. We think it will take months for the dust to settle at AUB as investors ponder what EQT/CVC didn’t like when they had a closer look under the hood.
Ridley Corp (RIC): This year Ridley agreed to acquire the IPF Distribution business from Dyno Nobel Limited (formerly part of Incitec Pivot) for $300 million, plus they have the option for an accompanying $75mn property associated with the business.
There are strong synergies from the acquisition including logistics efficiencies, cross-selling to farm customers, increased procurement scale, and stronger competitive positioning allowing Ridley to position itself as a full-service agricultural supplier, usually generating higher blended margins. Revenue is already forecast to lift from a$1.3bn in FY25 to $2.6bn in FY26.
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