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MONTREAL-Aon Corp.'s buying machine is rolling into Canada with the proposed $39.7 million Canadian ($28.9 million) purchase of loss-making insurance broker Sodarcan Inc.
The acquisition by Aon will give Sodarcan clients access to the international capabilities of the world's second-largest commercial insurance brokerage, said Robert Parizeau, chairman of Montreal-based Sodarcan.
In turn, Aon will strengthen its regional office network in Canada and take on a portfolio of mainly middle-market commercial insurance accounts, said James S. Horrick, president and chief executive officer of Aon Reed Stenhouse Inc. in Toronto, the Aon company that is making the purchase.
Although Sodarcan previously stated its intent to remain an independent Canadian insurance brokerage, the recent consolidation in the insurance brokerage business, which has been led by Aon, as well as the increasing globalization of all business, made the sale the best option for Sodarcan, Mr. Parizeau said.
"We have had more and more difficulty in serving clients that are operating on a worldwide basis," Mr. Parizeau said.
Sodarcan, which is the largest Canadian-owned insurance brokerage, has watched its gross revenues dwindle in recent years.
In 1990, when Sodarcan was still one of the 20 largest worldwide insurance brokerages, it had gross revenues of $102.9 million Canadian ($88.7 million). At year-end 1996, it had gross revenues of $97 million Canadian ($70.5 million). Those revenues have fallen further this year to about $77 million Canadian ($55.5 million) due to the sale of some business units-including the sale of its Vancouver retail portfolio to Aon Reed Stenhouse for $3.5 million Canadian ($2.5 million).
The profits have dwindled, too. In 1996, Sodarcan posted a net loss of $4.9 million Canadian ($3.6 million), compared with a net profit of $1.03 million Canadian ($754,900) in 1995.
Aon will pay $3.85 Canadian ($2.58) a share for Sodarcan's 10.3 million shares. Mr. Parizeau owns 25% of the equity in Sodarcan and has 75% of the voting rights. The offer for the shares will close July 3.
Purchasing Sodarcan will strengthen Aon's already extensive operations in Canada, said Mr. Horrick. Aon Reed Stenhouse, which is Aon's Canadian retail arm, had 1996 gross revenues of $135 million Canadian ($98.1 million) in 1996.
"Sodarcan had been a very solid competitor of ours and we had been looking at them for several years, but they had always wanted to remain 100% Canadian," Mr. Horrick said.
Sodarcan will increase Aon Reed Stenhouse's size in Montreal, where it already has an office, and give it two local offices in Quebec, he said.
In addition, Sodarcan has local offices in Toronto, southwestern Ontario and Halifax, Nova Scotia.
The retail operations of Sodarcan will be integrated in Aon Reed Stenhouse, and its reinsurance and consulting arms will be absorbed by other Aon companies in Canada, Mr. Horrick said.
Aon Reed Stenhouse will establish a subsidiary unit in Montreal, Aon Parizeau, to service French-speaking clients. Mr. Parizeau will be non-executive chairman of the unit, Mr. Horrick said.
The purchase comes on the heels of several others by Aon over the past year, including the purchase of Bain Hogg Group, Alexander & Alexander Services Inc. and Minet P.L.C.