Big UK deal, big capital raise. Why this ASX stock is in a trading halt

The AUB Group Ltd (ASX: AUB) share price is in a trading halt today after the insurance broker announced a major acquisition and capital raising.

The trading halt was requested ahead of a detailed update to the market. AUB shares last closed at $31.91 on Friday.

Let’s take a closer look at what AUB announced and why trading has been paused.

A major move into the UK

According to the release, AUB has agreed to acquire 95.9% of UK insurance broker Prestige for $432 million (roughly GBP (Great British Pound) 219 million).

Prestige operates across several areas of the UK insurance market, including retail insurance broking, specialist underwriting businesses, and insurance technology.

In FY25, Prestige generated GBP 310 million in gross written premium and GBP 17.5 million in EBITDA. That puts the purchase price at 12.9 times EBITDA, excluding expected synergies.

AUB said the acquisition strengthens its position in the UK retail insurance market. It also gives the group a larger platform to make additional small acquisitions over time.

Once the deal is completed, AUB expects its UK retail business to handle more than GBP 720 million in gross written premium. That would increase the share of earnings coming from offshore markets.

The deal also marks AUB’s first move into the UK MGA space. Management described this area as an attractive growth opportunity.

What this means for earnings

AUB expects the deal to deliver more than $10 million in annual cost savings by FY27.

These savings are expected to come from combining operations, shared services, and changes to leadership structures.

There may also be revenue benefits. AUB sees opportunities to cross-sell products across its existing UK businesses and Prestige’s specialist operations.

In the near term, the company said the acquisition and recent smaller deals should be earnings neutral before synergies. After synergies, AUB expects the transaction to be low to mid-single-digit earnings accretive in FY25.

How the deal is being funded

To fund the acquisition, AUB has launched a fully underwritten $400 million institutional placement at $29.40 per share. That price represents a 7.9% discount to Friday’s close.

The placement will result in the issue of about 13.6 million new shares, increasing AUB’s total share count by around 11.7%.

Retail investors will also be offered a share purchase plan of up to $40 million, with a maximum investment of $30,000 per shareholder.

In addition, AUB has secured a new $200 million debt facility, bringing total funding for the transaction to $600 million.

After the deal, AUB expects its debt levels to remain manageable, with more than $300 million in available cash and unused debt facilities.

What happens next?

AUB expects the trading halt to be lifted tomorrow, once the institutional placement is completed.

Settlement of the new shares is scheduled for Friday, with normal trading expected to resume shortly after.

The post Big UK deal, big capital raise. Why this ASX stock is in a trading halt appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Aub Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.