Arthur J. Gallagher (AJG) Strengthens Agribusiness With Buyout

·3 min read

Arthur J. Gallagher & Co. AJG recently acquired Files Agribusiness, LLC. The terms of the transaction have been kept under wraps.

Founded in 2010, Bastrop, LA-based Files Agribusiness, LLC is a full-service independent insurance agency, which specifically serves the agriculture community. It provides Federal Crop Insurance, agribusiness property, and casualty and agricultural aviation coverage to clients throughout the states of Louisiana, Arkansas, and Mississippi.

This recent transaction is a strategic fit for Arthur J. Gallagher as it will reinforce the acquirer’s agribusiness capabilities. The deal is expected to boost and widen Arthur J. Gallagher’s geographic presence in the Federal Crop Insurance space.

The latest transaction marks the fifth buyout of the insurance broker in third-quarter 2021.

Inorganic Growth Story

Acquisitions enable Arthur J. Gallagher to expand into desirable geographic locations, extend its presence in retail and wholesale insurance and reinsurance brokerage services markets, and increase the volume of general services that it currently provides. Its inorganic pipeline remains strong with around $300 million of annualized revenues associated with 40 term sheets signed or being prepared.

Arthur J. Gallagher currently carries a Zacks Rank #2 (Buy).

A solid capital position supports Arthur J. Gallagher in its growth initiatives. The company estimates more than $2.5 billion for mergers and acquisitions, consisting of $1 billion in cash, about $650 million of net cash generation in the second half of 2021, and $600 million to $700 million of borrowing capacity.

So far this year, it has made 21 acquisitions. Revenue growth rates have generally been 5-15% for 2021 acquisitions to date. The buyouts provide the company with incremental capabilities and services to assist clients across Australia, the U.K., Europe, and the United States. The company has been intensifying focus on its long-term growth strategies of delivering organic revenue growth, and pursuing mergers and acquisitions.

Other Acquisitions in the Same Space

There have been a host of acquisitions in the insurance space of late, given its significant capital availability. Brown & Brown, Inc.’s BRO subsidiary Bridge Specialty Group, LLC has acquired substantially all assets of Gremesco of New Jersey, LLC. Marsh McLennan’s MMC Marsh McLennan Agency has acquired Vaaler Insurance.

Price Performance

Shares of Arthur J. Gallagher have gained 45% in a year, outperforming the industry’s increase of 17.4%. Efforts to ramp up the company’s growth profile and capital position should help the stock retain the price momentum.

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Another Stock That Warrants a Look

Another top-ranked stock from the same space is Willis Towers Watson Public Limited Company WLTW, carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Willis Towers surpassed estimates in each of the last four quarters, with the average positive surprise being 13.52%.

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Marsh & McLennan Companies, Inc. (MMC) : Free Stock Analysis Report

Arthur J. Gallagher & Co. (AJG) : Free Stock Analysis Report

Brown & Brown, Inc. (BRO) : Free Stock Analysis Report

Willis Towers Watson Public Limited Company (WLTW) : Free Stock Analysis Report

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