BB&T to buy CGSC North America holdings for $500m cash

BB&T has agreed to buy Cooper Gay Swett & Crawford's North American operations, CGSC North America Holdings for $500m in cash; CGSC North America consists of the wholesale broker Swett & Crawford, which had merged with Cooper Gay in 2010. The deal is expected to add more than $200m in annual revenue, or an additional 15%, to BB&T Insurance.

Three months after it announced it would sell its North American operations, U.K.-based wholesale and reinsurance broker Cooper Gay Swett & Crawford (CGSC) has a buyer. North Carolina-based BB&T Corp. has agreed to acquire CGSC North America Holdings Corp. for $500 million in cash.

CGSC North America consists of the wholesale broker Swett & Crawford, which had merged with Cooper Gay to become Cooper Gay Swett & Crawford in 2010; specialty managing general agencies including J.H. Blades & Co and Creechurch International Underwriters; and a U.S. reinsurance broker. However, the specialty managing general agent Creechurch, which operates in Canada, is not included in the sale.

This transaction excludes all Swett & Crawford’s non-U.S. business which accounts for less than five percent of its total revenue.

The transaction is expected to add more than $200 million in annual revenue, or an additional 15%, to BB&T Insurance.

John Howard, chairman and chief executive officer of BB&T Insurance, said the deal “represents a compelling opportunity” to further build BB&T Insurance and add a team of industry specialists.

Retire Debt

CGSC announced last November that, following a strategic review of its group businesses, the company would pursue a sale of its North American business unit.

According to Standard & Poor’s, CGSC has indicated that it will likely use the proceeds from the sale to lower or eliminate corporate debt.

“The North American division, Swett & Crawford, was doing pretty well. It was pretty much the international group that had troubles,” said Julie Herman, associate director, Financial Services Ratings at S&P, in November when CSGC revealed its divestiture plan. “And because of that, the company’s capital structure became completely unsustainable. Their leverage was 11 times as of the 12 months ended Sept. 30, 2015. So we knew the management was going to take action.”

For the first nine months of 2015, the North American division comprised 60 percent of group revenues and 78 percent of group profits, according to S&P. Thus the sale of this division and use of proceeds is expected to have a material impact on the group’s credit profile, S&P said.

Herman called the sale a “drastic move” but one that will allow the management team to focus attention on their international operations.

Since purchasing Swett & Crawford, the company has experienced steep declines in revenues and earnings primarily from the group’s international division — while the North American business unit has remained relatively steady, according to S&P.

Steve Hearn, CGSC Group CEO, said the proceeds of the sale will provide CGSC with the resources it needs to transform the business and “build for the future with a fresh outlook.” He said the impact of the sale on the CSGC will be “profound” but it can now “build a business, centred on innovation, expertise and service, which is fit to challenge established markets and that will become a leading force in our chosen sectors.”

About BB&T

BB&T said it expects to record approximately $500 million of goodwill and intangibles as a result of this acquisition.

The transaction, which is subject to regulatory approval, is expected to close in the first half of 2016.

BB&T Insurance Holdings, the fifth largest insurance broker in the U.S. and the sixth largest internationally, is a wholly owned subsidiary of BB&T Corp. BB&T Insurance Holdings operates more than 200 insurance agencies through subsidiaries BB&T Insurance Services, BB&T Insurance Services of California, McGriff, Seibels & Williams, CRC Insurance Services, Crump Life Insurance Services and AmRisc.

Currently, BB&T’s wholesale insurance operations include property/casualty broker and managing general agent CRC Insurance Services, Crump Life Insurance Services and managing general underwriter AmRisc.

Topics Mergers & Acquisitions USA Agencies Insurance Wholesale