American insurance broker Arthur J. Gallagher & Co. (AJG) is paying $13.45 billion to acquire national independent insurance brokers group AssuredPartners. The company will use a mix of long-term debt, short-term borrowings, free cash, and common equity to fuel its purchase of AssuredPartners. As long as there are no regulatory issues, the deal will close in the first quarter of 2025.
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Arthur J. Gallagher & Co. notes that the deal with AssuredPartners will bring with it $160 million in synergies. Additionally, integration costs are expected to be around $500 million over the next three years. That includes $200 million of non-cash retention awards. Taking all of this into consideration, Arthur J. Gallagher & Co. expects the deal to be 12% accretive to its twelve-month adjusted GAAP EPS.
What This Means for AJG Stock
Once the deal is complete and Arthur J. Gallagher & Co. shows off the synergies of this acquisition, AJG stock is likely to benefit. As of now, the shares are slipping 0.76% on Monday. However, the stock is up 32.81% year-to-date and 21.91% over the last 12 months.
One thing that could be keeping AJG stock down today is a stock offering. The company is selling $8.5 billion of its common stock via an underwritten offering. There’s also a 30-day option for underwriters to acquire another $1.275 billion in shares. Stock offerings typically drop a company’s shares due to dilution concerns from current shareholders.
Is AJG Stock a Buy, Sell, or Hold?
Turning to Wall Street, the analysts’ consensus rating for Arthur J. Gallagher & Co. is Hold based on four Buy, seven Hold, and one Sell ratings over the last three months. With that comes an average price target of $301.45, a high of $325, and a low of $274. This represents a potential upside of 2.52% for AJG shares.
