BGC Partners has announced that it has reached an agreement to sell its Corant Global insurance and reinsurance broking businesses, including brands Ed Broking Group Limited and Besso Insurance Group Limited, to The Ardonagh Group Limited for a $500 million cash consideration.
It’s an interesting move given BGC had recently launched the Corant Global brand to encompass its insurance and reinsurance broking interests.
Perhaps made more interesting by recent moves in the broking world, in particular the divestments from Aon and Willis Towers Watson, which perhaps have led BGC to believe its efforts are better focused on its other initiatives in the brokerage, advisory and financial technology sphere.
With valuations currently high in the broking world, it’s perhaps the right time to divest of activities that are not core to the overall BGC group, allowing it to invest elsewhere.
Ardonagh said that it is buying 100% of Ed Broking Group and Besso Insurance (which were recently grouped together under the brand of Corant Global) comprising global wholesale and specialty (re)insurance broker Ed, Lloyd’s broker Besso, aviation specialist Piiq Risk Partners, German marine broker Junge, UK based MGA Globe Underwriting, Australian MGA Epsilon Underwriting and European MGA Cooper Gay.
Ardonagh said it will house the broking brands it is buying within its Ardonagh Specialty segment, which is currently comprised of Price Forbes, Bishopsgate and Compass London Markets.
With reinsurance and specialty broker Ed is part of this deal and so Ardonagh will gain a much larger reinsurance specialism, with brokers familiar with dealing with ILS funds and collateralized markets as part of the deal.
Commenting on the announcement, Ardonagh CEO, David Ross said, “We’re delighted to welcome each of BGC’s insurance brokerage businesses to our Ardonagh Specialty platform. This is a compelling shakeup of the global wholesale landscape, bringing two of the last remaining independent outfits of scale together to create the largest privately owned specialty broker in London, safeguarding choice for both clients and employees. A backdrop of unprecedented levels of consolidation has created a vacuum in the market, a space from which the BGC and Ardonagh businesses will emerge together as a preeminent force, restoring balance and cultivating a preferred destination for top-performing talent.”
CEO of Ardonagh Specialty, James Masterton, added, “This is a hugely complementary acquisition, aligning and accelerating our ambitions in the global specialty arena. The specialist broking and underwriting teams within the BGC operations are highly respected in their fields and their market leading progress in digitisation matches our own. We know that clients are looking for more innovation, for both product and capacity delivery, and our joined-up efforts in this space will ensure we remain competitive.”
Steve Hearn, CEO of BGC Insurance, also said, “It is exciting to announce the sale of our insurance operations to The Ardonagh Group. Thanks to the efforts of our colleagues and under the parentage of BGC we have seen a tremendous period of growth. We plan for that upward trajectory to continue.”
Andrew Wallin, President of BGC Insurance, also commented, “Becoming part of The Ardonagh Group marks the start of a new and exciting chapter for us all. We are joining an organization that has scale, a track record of success in our industry and a shared vision to empower our broking and underwriting businesses.”
Howard W. Lutnick, Chairman and Chief Executive Officer of BGC, further explained the sale, “The agreement to sell our Insurance Brokerage business for $500 million reflects the significant value we have created since entering this market in 2017. Like our previous sales of eSpeed and Trayport, as well as our IPO and tax-free spin-off of Newmark, this sale further demonstrates our commitment to driving shareholder value.
“While we have built an exceptional Insurance Brokerage business, this sale will focus our resources on Fenics. We expect to use the proceeds to accelerate Fenics growth and to repurchase shares and/or units.
“Ardonagh is an excellent partner to continue our Insurance Brokerage business. The combined platform will add to their strength, capability, and create the world’s leading independent specialty insurance broker.
“While our Insurance Brokerage business provided less than 10 percent of BGC’s total revenue over the trailing twelve-months, the $500 million of cash that we expect to receive represents over 17 percent of BGC’s fully diluted market capitalization.
“The sale proceeds will provide additional capital to accelerate Fenics growth, which increased 40 percent year-over-year in the first quarter of 2021. Additionally, our Fenics Growth Platforms, which include Fenics UST, Fenics GO, Lucera, Fenics FX, and other newer standalone platforms, grew more than 82 percent over the same period. While the growth of our Insurance Brokerage business was industry-leading, we believe the scale and scope of the Fenics opportunity is far greater, with potential to drive shareholder value materially higher.”
Lutnick, concluded, “We have been clear and consistent about our plans to express the value of BGC’s assets. This transaction demonstrates our commitment to increase shareholder value and focus our interest on Fenics, which we believe represents the greatest opportunity for our Company.”
The transaction is expected to close in the second half of 2021 and BGC noted that its Insurance Brokerage business contributed approximately $191 million in revenue during the twelve-month period ending March 31, 2021.