Thoughts on Steadfast Group Ltd (ASX: SDF) Please
Comment on SDF please.
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Answer
Hi Sandeep,
The stock surged in June after receiving a non-binding $6.00 per share takeover proposal from a consortium comprising Amwins Group and Dragoneer Investment Group, a 52% premium to the previous close that values the business at around $7.7bn – the stock is trading ~14% below the bid on Thursday despite the board intending to recommend the proposal if binding terms are agreed, although completion remains subject to due diligence and regulatory approvals, with a potential close in late 2026.
As a refresher, SDF makes money primarily by earning commissions and fees from insurers on insurance policies placed through its network of ~400 brokers. It also generates income from its underwriting agencies and by providing services, technology and support to member brokers, as well as from equity stakes in some broker businesses. We still think the risk from AI is real for these sorts of businesses – operators that essentially sit in the middle of product origination and customers are ripe for disruption, in our view – concerns obviously not shared by the suitor.
Our concern here would be that the bid fails and the stock drops back to $4. The risk of that happening is being priced to some extent by the market given the prevailing discount to bid price, but it’s a hard one to play here given these competing forces. We wouldn’t be buying SDF given the downside if the bid is pulled during DD. If we held, we’d be de-risking the position by selling half.
