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Bank deal combines Wells Fargo Insurance, ABD


SAN FRANCISCO--ABD Insurance & Financial Services will become part of Wells Fargo Insurance Services Inc. under an all-stock deal, valued at about $1.5 billion, that was announced late Friday by parent companies Wells Fargo & Co. and Greater Bay Bancorp.

The deal comes on the heels of speculation that East Palo Alto, Calif.-based Greater Bay, which has been rumored to be on the block for some time, would divest Redwood City, Calif.-based ABD on completion of a strategic review of the bank's operations (BI, April 23).

According to Business Insurance's 2006 brokerage rankings, Wells Fargo was the world's fifth largest broker--and fifth largest broker of U.S. business--based on $959.4 million in 2005 brokerage revenues. ABD was the 15th largest broker of U.S business, based on $165.0 million in 2005 brokerage revenues from U.S. clients.Under terms of the deal, which is expected to be completed by the fourth quarter, Greater Bay shareholders will receive shares of Wells Fargo common stock for their shares of Greater Bay common stock, based on a Wells Fargo measurement price. Assuming a price between $32.325 and $39.325, the total value of the transaction would be approximately $1.5 billion, according to a statement.

"We look forward to welcoming ABD's more than 700 team members to Wells Fargo Insurance Services Inc.," Dave Zuercher, chairman and chief executive officer of WFIS, said in a statement. "ABD's specialized products and exceptional service will increase our presence in the West and add important offerings to our nationwide business."

News of the deal surprised some brokerage sector observers.

"It wasn't something which was on my screen," said John Wicher of John Wicher & Associates Inc. in San Francisco. "I thought a different scenario would play out, in that you'd have a potentially higher valuation realized by breaking up" ABD and Greater Bay, he said. Nevertheless, the deal "makes a lot of sense" for Wells Fargo, in that Greater Bay's asset-based clients will fit nicely into Wells Fargo, and Wells Fargo already knows the insurance brokerage business, he said.

Timothy J. Cunningham, a partner with OPTIS Partners Inc. in Chicago, said he also thought Greater Bay would have divested ABD. "The question is to what extent, if any, ABD influenced (Wells Fargo's) decision in purchasing Greater Bay," he said.