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Arthur J. Gallagher to buy Canadian broker Noraxis for $388 million

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Arthur J. Gallagher to buy Canadian broker Noraxis for $388 million

Arthur J. Gallagher & Co. has signed an agreement to acquire about 87% of Canadian broker Noraxis Capital Corp. for total consideration of about $388 million, Gallagher announced Monday.

The transaction is subject to regulatory approval and is expected to close in July.

Toronto-based Noraxis is a top-five Canadian insurance broker that provides retail commercial, personal and employee benefits insurance products and services, Gallaher said in a statement announcing the acquisition. Noraxis generated nearly 125 million Canadian dollars ($117.7 million) in revenue for the year ended Dec. 31, 2013, has more than 650 employees and operates out of 23 offices across Alberta, Manitoba, New Brunswick, Nova Scotia and Ontario, Gallagher said.

“In Noraxis, we have found our ideal Canadian partner and together we now have a solid platform for organic growth and a leadership team that will continue to attract new merger partners,” said Gallagher Chairman, President and CEO J. Patrick Gallagher Jr. in the statement. “By joining with Gallagher, Noraxis will be able to leverage our sales and service capabilities across Canada. In particular, our combined expertise in areas such as energy, construction and mining align well with the growth opportunities in the Canadian market. We are extremely pleased to welcome the Noraxis team to our Gallagher family of professionals.”

Noraxis is an affiliate of Toronto-based Roins Financial Services Ltd., which also owns the RSA Canada group of companies.

The acquisition comes on the heels of Gallagher's $938 million purchase of the insurance brokerage units of Australian conglomerate Wesfarmers Ltd. in April.

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“By adding Canada to our recent expansion in Australia, New Zealand and the U.K., we are now well positioned in those countries to replicate our successful acquisition strategy of partnering with smaller, family-owned, and entrepreneurial agents and brokers,” he added. “In each of the countries, we believe there will continue to be a wave of consolidation opportunities like we are seeing in the United States.”

In addition to establishing Gallagher as a top-five retail broker in Canada, Gallagher said that other benefits of the transaction include sharing a client focus that is primarily middle-market; complementing and expanding specialized niche practice groups and capabilities; providing opportunities to establish new managing general agency capabilities; establishing Gallagher as a “major player” in the Canadian employee benefits business; and providing Gallagher's existing Canadian employee benefits businesses with a strong growth platform.

Gallagher said Noraxis' commercial lines middle-market business currently brokers nearly 40,000 policies and is expected to generate CA$92 million ($84.7 million) of annualized revenues in 2015. Its employee benefits business is expected to generate CA$19 million ($17.5 million) next year and its personal lines business CA$27 million ($24.9 million) in annualized revenues in 2015.

The other 13% of Noraxis will continued to be owned by Noraxis management employees, Gallagher said in the statement.