Apax Partners and Morgan Stanley to Buy Hub International for $1.7 Billion

Apax Partners and the private-equity investment arm of Morgan Stanley will buy Chicago insurance brokerage Hub International Ltd. for approximately $1.7 billion, it was announced today. The group will pay Hub $40 per share, a 16% premium over the shares' Friday close. Hub provides insurance and employee benefit services to medium-sized companies and derives one-quarter of its business in Canada. Insurance brokers, with their relatively small capital investment requirements and hefty profit margins, hold great appeal for private equity firms. In 1998, Kohlberg Kravis & Roberts bought Willis Group Holdings Ltd. for around $300 million; in 2001, they brought Willis Group public for a gain of $1.2 billion. Apax and Morgan Stanley plan to provide a capital infusion to Hub and expand its reach in the American South. Morgan Stanley's principal investment group, in keeping with the new strategy of CEO John Mack, is becoming much more active; it is also involved in the pending record-setting buyout of electricity company TXU Corp. Hub is entitled to continue to solicit proposals until March 19.

Source: Wall Street Journal
Commentary: A General Insurance Brokers Story • Apax, Morgan to buy Hub Int'l for $1.7 billion [Reuters] • Apax, Morgan to buy Hub Insurance for $1.7 billion [MarketWatch]
Stocks/ETFs to watch: Hub International Ltd. (HBG), Morgan Stanley (MS). Competitors: Aon Corp. (AOC), Brown & Brown Inc. (BRO), Marsh & Mclennan Companies Inc. (MMC). ETFs: iShares Dow Jones US Broker-Dealers (IAI), Vanguard Financials ETF (VFH), KBW Capital Markets ETF (KCE)

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