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Cadence Bank to Sell Insurance Operations of Cadence Insurance to Arthur J. Gallagher & Co.

Date: Oct 25, 2023 @ 07:55 AM
Filed Under: Banking News

Cadence Bank entered into a definitive agreement to sell its insurance operations, Cadence Insurance, Inc., to Arthur J. Gallagher & Co. for $904 million in cash1.
 
Key Highlights:

  • Sale of Cadence Insurance, Inc., the second largest bank-affiliated insurance brokerage in the nation as ranked by Business Insurance, will allow Cadence to capitalize on the valuation premium and reinvest the capital into its strategic transformation efforts and growing its core banking franchise.
  • We believe this transaction is extremely attractive for a bank-owned brokerage of 5.4x LTM revenue.
  • Transaction is financially compelling with estimated 24% tangible book value per share3 accretion and 160 bps improvement in CET1.
  • On an after-tax basis, the immediate net capital increase is expected to be approximately $620 million and net cash proceeds are estimated at $650 million. The significant capital creation bolsters the Company's balance sheet flexibility and profitability profile, while providing flexibility for capital redeployment to drive shareholder value.
  • The sale is expected to be slightly positive to earnings per share through the use of cash proceeds to reduce wholesale borrowings. Further net income and earnings per share enhancements are anticipated as generated capital is deployed through strategic and franchise growth initiatives over time.

"We have always liked the insurance business," said Dan Rollins, chairman & CEO of Cadence Bank. "Over the past 24 years, under exceptional leadership, the team has grown Cadence Insurance into the second largest bank-affiliated insurance brokerage in the country. The sale will allow us to focus on what we do best – building strong, long-lasting banking relationships, while also continuing to realize our long-term strategy. I have enjoyed working with the Cadence Insurance team immensely and have profound respect for what they do, and how well they do it. On behalf of all of us at Cadence, we will miss them."

Rollins continued: "Gallagher is well regarded for its culture, ethics, service and responsibility to its people, and I am fully confident our customers and teammates can expect the same level of quality service and commitment to being a great place to work they experience today."

Markham McKnight, CEO of Cadence Insurance, added, "Cadence Bank has been a fantastic partner of ours for the past 24 years, supporting our growth and evolution. During this collaborative process with Cadence Bank, we both determined that Gallagher is the best partner for us. Our team is what makes us who we are, and Gallagher recognized from the first conversation the talent of our team and its commitment to our clients and communities. We are energized about our future with Gallagher and what our team will be enabled to deliver to our clients."

Cadence anticipates the transaction, which is subject to standard closing conditions, will close in the fourth quarter of 2023. Cadence Insurance executive leadership, management and employees will join Gallagher following the sale.

Cadence Insurance is an insurance brokerage business that specializes in commercial and personal property & casualty, employee benefits, business solutions, and risk management services. Cadence Insurance manages 30 offices in eight states across the Southeast and has consistently been recognized as a Best Places to Work by Business Insurance, Baton Rouge Business Report and Mississippi Business Journal.

Morgan Stanley & Co. LLC, MarshBerry, and Ernst & Young served as financial advisors and Hodgson Russ LLP provided legal counsel to Cadence.

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