Steadfast Group (SDF) – Take the Money

Steadfast Group Limited provides general insurance brokerage services in Australasia, Asia, and Europe. It also offers insurance underwriting services and related services. Steadfast Group Limited was incorporated in 1996 and is based in Sydney, Australia.

Steadfast Group (SDF) has received a takeover proposal from a consortium led by American wholesale insurance distributor Amwins at $6.00 a share, a circa 50% premium to recent trading levels, which the board intends to recommend shareholders accept subject to a formal offer and no superior bid emerging. The non-binding indicative offer, news of which sent Steadfast shares soaring more than 30% on the day, implies an enterprise value for Steadfast of around $7.7 billion, and follows previously rejected bids from the consortium – comprised of Amwins and US-based firm Dragoneer Investment Group – pitched at $5.50 a share and $5.83 a share.

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Following completion, Amwins will take the Steadfast underwriting agency business, while Dragoneer will get the broking business. The transaction, which would be implemented via a scheme of arrangement mechanism, gives the consortium eight weeks of due diligence access to 6 August, with a potential extension to 20 August. Ord Minnett views the Steadfast board’s decision as sensible given the current difficult environment for premium rates and the Australian company’s limited capital position.

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Absent the current bid, the chances of the realising a value for the company of $6.00 a share any time soon would appear remote, even if that price is towards the bottom end of its historical trading range. We make no changes to our EPS estimates but raise our target price to $6.00 from $5.55 and lower our recommendation to Hold from Buy.

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