(January 22 – 10:00 ET) – Insurance brokerage consolidator Hub International Ltd. has entered into a definitive agreement to acquire Kaye Group Inc.

The acquisition of Kaye Group, added to Hub’s current holdings in Chicago and the Boston area, continues Hub International’s expansion into the U.S.

Kaye Group offers insurance brokerage, risk management and underwriting services throughout the United States, with offices in New York, Connecticut, Rhode Island, and California. In 1999 and the first nine months of 2000, Kaye Group had revenue of US$68.7 million and US$57million respectively, and at September 30, 2000 had total assets of US$152.1 million.

The deal is being structured as a merger. Under the terms of the deal, Hub will pay US$14 per share, US$9.33 in cash and US$4.67 in principal amount of 5-year 8.50% subordinate convertible debentures of Hub International. The debentures are convertible into common shares of Hub International at $17 per share.

The holders of approximately 55% of the shares of Kaye Group, under individual agreements, have agreed to vote in favour of the merger, and have granted Hub an irrevocable option to purchase their shares of Kaye Group in the event that the merger is not completed.

Fairfax Financial Holdings Ltd., which currently owns approximately 40% of Hub International’s outstanding shares, has committed to support the transaction. Fairfax has agreed to purchase at least US$35 million principal amount of Hub International convertible debentures bearing the same interest rate and following the same terms as the convertible debentures issued as part of the merger.

Marty Hughes, chairman and CEO of Hub, said, “The proposed acquisition of Kaye represents a unique opportunity to continue our growth strategy and further strengthen Hub. In addition to Kaye’s position as a prominent New York broker, Kaye has an established reputation as an innovator among producers and insurance carriers in program business.”

Subsequent to the transaction, Bruce Guthart, Kaye’s president and CEO, will be appointed as a director of Hub and will join Hub International in the role of president, U.S. Operations. Guthart has also agreed to reinvest the after-tax proceeds from the sale of his Kaye shares in common shares of Hub International.

The transaction is expected to close in the second quarter of 2001, is subject to regulatory approvals, approval by Kaye shareholders, compliance with applicable legal and regulatory requirements and standard closing conditions.
-IE Staff