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Arthur J. Gallagher & Co. 8-K Report, Material Agreement (Aug 13, 2013)

Filed August 13, 2013For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) announced on August 12, 2013, the acquisition of Bollinger, Inc., a significant player in the retail property and casualty insurance brokerage, wholesale brokerage, program management, and employee benefits consulting sectors. This strategic move strengthens AJG's presence with approximately 500 employees and eight offices across New Jersey, New York, Pennsylvania, and Connecticut. The acquisition was structured as a merger where Bollinger Holdings, Inc. merged into AJG's subsidiary, JPGAC, LLC. The total consideration for the transaction amounted to approximately $172 million in cash, which was used to retire Bollinger's existing debt and cover transaction costs, with the remainder distributed to Bollinger's shareholders. Additionally, AJG issued $140 million worth of its common stock (3,177,486 shares) to the Bollinger shareholders as part of the merger consideration. The cash portion of the payment was funded through a combination of operational cash and existing credit facilities.

Key Highlights

  • 1Arthur J. Gallagher & Co. acquired Bollinger, Inc., a diversified insurance broker and benefits consultant, on August 12, 2013.
  • 2The acquisition expands AJG's geographic footprint and service offerings with Bollinger's 500 employees and eight offices in New Jersey, New York, Pennsylvania, and Connecticut.
  • 3The total transaction consideration was approximately $172 million in cash, used to repay debt and cover expenses, plus $140 million in AJG common stock.
  • 4The deal was structured as a merger of Bollinger Holdings, Inc. into AJG's subsidiary, JPGAC, LLC.
  • 5AJG funded the cash portion of the acquisition through its existing cash reserves and borrowings under its credit agreement.
  • 6A customary post-closing working capital adjustment to the merger consideration is anticipated.
  • 7A portion of the merger consideration ($22 million) was placed in escrow to secure indemnification obligations related to customary warranties and covenants within the agreement.

Frequently Asked Questions

The acquisition of Bollinger, Inc. strategically enhances Arthur J. Gallagher & Co.'s market position by expanding its geographic reach into key Northeastern states (New Jersey, New York, Pennsylvania, and Connecticut) and broadening its service capabilities in property and casualty insurance brokerage, wholesale brokerage, program management, and employee benefits consulting. The addition of approximately 500 employees and eight offices represents a significant consolidation of operations and client base.

The total consideration for the acquisition was approximately $172 million in cash, which was utilized to settle Bollinger's outstanding debt and transaction-related expenses. In addition to the cash component, Arthur J. Gallagher & Co. also issued $140 million worth of its common stock, comprising 3,177,486 shares, to the shareholders of Bollinger.

Arthur J. Gallagher & Co. funded the cash portion of the acquisition using a combination of its existing operational cash reserves and borrowings drawn from its established credit agreement. This indicates the company's financial flexibility and its ability to leverage existing credit lines for strategic growth initiatives.

Yes, the acquisition agreement includes a customary post-closing working capital adjustment, which may alter the final merger consideration. Additionally, $22 million of the merger consideration was placed in escrow to serve as partial security for AJG's protection against any potential indemnification obligations arising from customary warranties and covenants made by the seller regarding the acquired business.