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CHICAGO--Hub International Ltd. is asking shareholders to approve its $1.9 billion "going private" transaction with Maple Tree Acquisition Corp. after declining to accept a higher acquisition proposal from a "public company with a market capitalization of less than $2 billion," Hub said in Securities and Exchange Commission papers filed Monday.
In the filing, Hub said that its parent, Toronto-based Fairfax Financial Holdings Ltd., strongly favored an all-cash deal and was therefore not supportive of the competing offer, which included stock, adding that without Fairfax's support the deal was unlikely to succeed.
One analyst speculated Monday that the strategic buyer was Glen Allen, Va.-based Hilb Rogal & Hobbs Co., the world's 10th-largest brokerage according to Business Insurance's 2006 rankings (BI, July 17, 2006).
Hub last month said Apax Partners and Morgan Stanley Principal Investments, which control Maple Tree, upped its share price offer for the Chicago-based brokerage to $41.50 in cash from its original offer of $40 per common share following bids from other suitors. The deal also includes the assumption of $145 million in debt.
According to the SEC papers, after contacting 46 potentially interested parties, Hub received two nonbinding acquisition proposals as part of the "go-shop" provision with Maple Tree, which allowed Hub to solicit competing bids under certain circumstances.
In addition to the publicly traded company, Hub also received a competing nonbinding acquisition proposal from a private equity fund manager, which later opted to not pursue a deal, SEC papers say.
On April 3, Hub financial advisor Merrill Lynch was informed by the publicly traded company that it was not prepared to submit an all-cash proposal, and Hub subsequently informed the interested buyer that it could not accept its cash and stock proposal, according to the SEC filing.
"We suspect the strategic buyer could be HRH since this is the only publicly traded broker with a market cap in this range, that has not already announced strategic alternatives," David Small, an analyst with Bear Stearns & Co. Inc. wrote in a note Monday. "A potential move by HRH to acquire (Hub) would be a surprise to most investors, as many view HRH as a private equity target, not a potential acquirer. It seems that HRH management may be trying to use their (high P/E multiple) to grow the business."
An HRH spokeswoman declined to comment, citing company policy to not comment on rumors.