Gallagher delays Giles acquisition closure to November

Arthur J Gallagher now expects to close its acquisition of Giles in “early November”, after previously estimating the deal would complete this month.

The news comes as Gallagher’s group profit rose 29% in the first nine months of 2013 despite higher acquisition costs.

Profit rise

Gallagher as a whole made a profit after tax of $208.6m (£129.7m) in the nine-month period, up from $161.5m in the same period last year.

Earnings before interest, tax, depreciation, amortisation and change (EBITDAC) acquisition earn-out payables increased by 16% to $391.2m (first nine months of 2012: $336.7m).

In the brokerage segment alone, profit was up 24% to $154.3m (first nine months of 2012: $124.3m) and EBITDAC rose 23% to $362.4m (first nine months of 2012: $294.2m).

Organic growth in base commissions and fees in the brokerage division increased to 5.5% in the first nine months of 2013 from 4.1% in the same period last year.

Acquisition costs

The improvements came despite a jump in acquisition costs for the nine-month period to $17.3m from $12.3m in the same period last year.

Part of the increase was caused by the addition in the third quarter of $1.6m of acquisition costs for US broker Bollinger, which Gallagher bought in August. The remainder is down to the continuing integration of UK broker Heath Lambert, which Gallagher bought in 2011.

The acquisition costs do not include the Giles purchase, which is still subject to regulatory approval. However, Gallagher said the acquisition costs figure did include a $3m gain it made on derivatives it had bought as a foreign currency hedge for the Giles deal.

‘Tremendous quarter’

Gallagher announced on 4 September it would be buying Giles, the fifth-largest retail broker in the UK. It expects the purchase to bring in annual revenues of more than $140m.

It expects Giles and Bollinger combined to bring in more than $240m of annual revenue.

“Our acquisition programme had a tremendous quarter,” the company said in a statement. “Already, our organisations are coming together and finding ways to sell more business and realise operational synergies. We are extremely pleased to welcome all of their outstanding professionals to the Gallagher family of companies.”