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IAG in £570mn deal for Equity

The acquisitive Australian insurer IAG has agreed a £570mn deal to buy UK motor underwriter and broker Equity Insurance Group, 18 months after the company was taken private in an £428mn private-equity backed management buy-out.

IAG has requested a 48-hour break in trading on its shares on the Australian Stock Exchange in order to complete the deal.

The statement said: “The trading halt is necessary as IAG has signed an agreement to acquire leading UK motor underwriter and broker, Equity Insurance Group and will be undertaking an institutional placement. We request that the trading halt be in place for two trading days.”

The deal further increases IAG’s presence in the UK motor sector after it acquired Hastings Direct from David Gundlach’s Logan Settlement, a Gibralter-based charitable trust, in September this year.

It is understood that chief executive Neil Utley and his senior management team will remain with Equity following the takeover. Backed by investors Englefield Capital and Duke Street Capital, Utley agreed to buy the London Stock Exchange quoted Cox Insurance Holdings in April 2005 for £428mn including £130mn of debt, renaming the firm Equity.

Standard & Poor’s affirmed IAG’s AA insurer financial strength rating following the announcement.

In a statement, the rating agency said: “While the acquisition is more material than that of Hastings, Standard & Poor’s considers the amount of due diligence conducted for this transaction as appropriate. Standard & Poor’s expects that in funding the acquisition, IAG will maintain its financial structure at a level consistent with its AA insurer financial strength ratings, and capitalisation will remain very strong with the benefits of additional geographical diversity.”

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