AUB Group Ltd (ASX: AUB)
Hi guys, a quick question from me - would love your view on AUB. Do you consider it a buy? Cheers, Josh
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Answer
Hi Josh,
AUB Group (ASX: AUB) is one of Australasia’s leading insurance broking networks, generating earnings by connecting businesses and individuals with insurance products through its extensive broker partner network, while also owning specialist underwriting agencies that design and distribute niche insurance solutions.
Last October saw Swedish private equity firm EQT launch an all-cash offer of $45 per share, valuing AUB at approximately $5.25 billion, with AUB’s board agreeing to begin exclusive due diligence negotiations. The PE firm ultimately walked away and the stock collapsed below pre-bid levels – another example of why taking at least part profit when a bid is lobbed is generally a good idea.
- AUB is now trading ~$24 which raises the question of whether the due diligence uncovered genuine problems or whether EQT simply couldn’t get financing over the line, or justify the price.
In January — just months after EQT withdrew its takeover approach — AUB raised $400 million at $29.40 per share, 17% above Friday’s close, to fund the acquisition of Prestige Insurance Holdings, an established UK and Irish insurance group spanning retail broking, specialist underwriting agencies and Insurtech. The deal gives AUB a meaningful platform to replicate its highly successful Australian broking and underwriting model in the large and fragmented UK insurance market.
- Another ASX company ripping up shareholder value, at least short-term, with an offshore acquisition.
The stock has also been weighed down by AI disruption fears, leaving AUB trading ~35% below its 5-year average valuation. We think this is right, and believe that these sorts of businesses lend themselves to AI disruption. For this reason, we don’t have any interest in AUB.
