Goldman Sachs (GS) said that it will sell USI Holdings, a private equity affiliate of Goldman Sachs Capital Partners. USI Holdings is an insurance and financial products distributor that sells property and casualty insurance to small and midsized business. It has annual revenue close to $700 million. Goldman Sachs bought the company for $1.4 billion in 2007. This translates to an EBITDA multiple of 9.7 times. This also means that it paid USI shareholders $17 cash per share, a premium of 9% over the company’s stock price.
According to sources, an auction has already been started. Its potential buyers include its key competitors such as Alliant Insurance Services, an insurance company under the Blackstone Group (BX), and Hub International of Morgan Stanley (MS) and Apax Partners. There are no details with regards to the price of this transaction. Its annual EBITDA is at $190 million. Assuming a 9 to 10 times EBITDA multiple, it could sell for as much as $1.7 billion to $1.9 billion.
Goldman Sachs has written off around $485 million in equity since the time it purchased the company. USI Holdings’ strength is its ability to cross-sell various financial products to its clients. However, its high financial leverage offset its strength. In addition to that, it faces economic headwinds in an uncertain macroeconomic environment.
Property & Casualty Insurers Outlook Still Uncertain
Based on Ernst & Young property and casualty and insurers outlook, uncertainties surrounding the global economy will continue to have significant impact on the insurers. The global economy remains fragile and volatility is expected throughout this year.To continue reading, click here.
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