Insurance broker USI Holdings Corp. said it is considering a buyout offer after it received an inquiry from a group of private equity investors to purchase the company's outstanding shares.
One analyst said there is a 70 percent chance the transaction will be completed.
In a statement yesterday after the close of trading, the Briarcliff Manor, N.Y.-based broker said it has formed a special committee to examine a proposal from a private equity firm to purchase all of the outstanding shares of the company's stock.
USI did not identify the equity firm.
The broker said it has hired Lazard Freres & Co. LLC and Dewey Ballantine to assist in the review. It added that no decision has been made.
In an analyst's note, David Lewis with SunTrust Robinson Humphrey, based in Atlanta, said there is a better than 70 percent chance USI would be acquired at a minimum stock price of $17-to-$19 per share.
If the company does go private, he said, it would allow it to finalize its integration and margin expansion programs more quickly with “cheap capital to continue pursuing strategic acquisition opportunities.”
The company, Mr. Lewis added, has “struggled to meet analysts' revenue and earnings forecasts over the past several quarters, causing the company to trade at a significant discount to its better respected peers.”
He said that USI is still viewed as having “an attractive business model.” He noted the firm's acquisition pipeline has slowed, but its emphasis on employee benefits business helps to insulate it from the soft market cycle the property-casualty market is currently experiencing.
USI also issued a preliminary unaudited financial result for the third quarter ending Sept. 30.
USI said it expects to report total revenues between $130.5 million and $131.5 million compared with total revenues of $127.3 million in the third quarter of 2005. Income from continuing operations, before taxes, are approximately $8 million and $9 million compared with $9.8 million in 2005.
Operating income for the quarter will be impacted by $1.5 million of expense in connection with the review of the private equity stock acquisition.
The company has a market capitalization of more than $916 million.
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