IAG shares lift on $1.35b RAC WA deal
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More news: IAG shares jumped in early trading after the insurer announced a $1.35 billion deal with The Royal Automobile Club of Western Australia to buy the RAC Insurance business and provide general insurance products to its members.
Shares had lifted 5% to $8.84 at 11.10am AEST.
IAG to acquire RAC WA insurance business in $1.35b deal, shares rise
The news: Insurance giant IAG has agreed to buy the RAC Insurance business and provide general insurance products to its members in a $1.35 billion deal that is part of a long-term strategic alliance with the Royal Automobile Club of Western Australia.
The numbers: Under the deal, IAG will pay $400 million to acquire the entire RAC Insurance business and $950 million for a distribution and licensing agreement, which includes a 20-year exclusive distribution agreement for RAC branded home, motor and niche insurance products.
IAG said the RACI portfolio is expected to add about $1.5 billion to its gross written premiums and it will incur customary one-off transaction costs of $20 million and annual integration costs $15 million to $25 million over three years. The transaction will be funded from its surplus capital and debt.
IAG shares were up 3.5% to $8.72 in early trading.
The context: IAG said the transaction is expected to be earnings per share accretive in the first full year of ownership and mid-single digit EPS accretive on full synergy run rate basis. The Royal Automobile Club of Western Australia is the state’s largest motoring club, and provides services including roadside assistance and insurance to its 1.3 million members.
The transaction follows a similar deal in November in which IAG acquired 90% of Royal Automobile Club of Queensland's (RACQ's) existing insurance underwriting business for $855 million. A month later, rival Allianz picked up the general insurance business of the Royal Automobile Association of South Australia (RAA), along with a distribution agreement for $642 million.
The source: ASX
