Steadfast to acquire insurance broker Coverforce for $412m

ASX-listed Steadfast Group (ASX: SDF) is set to raise $200 million in order to acquire one of Australia's largest privately owned insurance brokers Coverforce for $411.5 million.

The deal, announced toady, comes in conjunction with Steadfast's FY21 results which saw the company report statutory net profit after tax (NPAT) of $143 million, compared to a loss of $55.2 million last year.

The acquisition of Coverforce, an insurance broker founded in 1994 with a focus on the SME (small and medium enterprise) market, will be fully funded through the $200 million institutional placement and $217.8 million in scrip consideration.

Post-acquisition, Steadfast hopes to benefit from access to Coverforce's technology and services platform, and will appoint the broker's founder and managing director Jim Angelis into a key role within the merged organisation.

"The merger of Coverforce into Steadfast represents a unique opportunity to further strengthen Steadfast as the largest general insurance broker network and largest group of insurance underwriting agencies in Australasia," Steadfast managing director and CEO Robert Kelly said.

"The combination of both businesses is highly complementary with exceptional strategic and cultural alignment.

"Coverforce is an established insurance broker that has consistently delivered double-digit revenue growth rates, excellent operating efficiencies and consistent market leading margins."

The $200 million institutional placement will be accompanied by a share placement plan (SPP), with securities to be issued at a price to be determined but which will not be less than $4.35.

Following the completion of the placement, Steadfast will launch an SPP to raise up to $20 million, with funds going toward additional working capital and capacity to fund future acquisitions.

Steadfast today also announced its FY21 results which saw NPAT on a statutory basis come in at $143 million, up from a loss of $55.21 million in FY20, and underlying revenue of $899.9 million (up 8.9 per cent).

"Steadfast has delivered a strong FY21 operating and financial performance, demonstrating the strength of our network, platform and resilient business model in the current environment," Kelly said.

"The strong growth was mainly driven by a continuation of the hardening insurance cycle and robust organic growth and higher margins in our insurance broking and underwriting agency business and supported by our disciplined approach to undertaking accretive acquisitions."

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