Pemba exit from Australia's Coverforce challenged by founder

AUB said in a statement that it would work with Pemba to secure the interests of other shareholders, with the aggregate consideration expected to be in the A$150-200 million ($102-136 million) range. This will be achieved “either by AUB Group reaching an agreement with those other shareholders or through Pemba Capital exercising its exit rights,” which may refer to a drag-along right that obliges other shareholders to sell alongside the private equity firm.

However, Jim Angelis, founder and CEO of Coverforce, said in a statement cited by local media that Pemba has no authority to undertake a sale. “The matter is before the Supreme Court this morning and will be strongly resisted by the majority shareholders. We are also taking advice as to an action for damages against Pemba Capital Partners and AUB Group,” he added.

Established in 1994, Coverforce claims to be Australia’s largest privately-owned insurance broker. It provides group income protection insurance for blue-collar workers and serves as a general insurance broker focused on the small and medium-sized enterprise (SME) market. The company is headquartered in Sydney and has branch offices in Melbourne, Southport, and Adelaide, as well as a partner network.

ING bought a 50% stake in Coverforce in 1998 and exited via a management buyback seven years later. Pemba – then known as RMB Capital Partners – invested an undisclosed sum in 2012 with a view to helping accelerate growth. Since then, there have been several bolt-on acquisitions.

AUB operates a network of 93 insurance broking businesses across Australia and New Zealand, servicing more than 550,000 clients with over one million policies. Gross written premium is approximately A$3.2 billion. In Australia alone, AUB has a 20% share of the commercial insurance broking market as well as capabilities in life insurance broking, premium funding, claims management and legal services.

The company said the proposed acquisition of Coverforce – which is contingent on the completion of due diligence and regulatory approvals – is consistent with an M&A strategy that delivers growth and scale, opens up new market segments, and adds to core capabilities.

Formed in 1998, Pemba specializes in buy and build partnerships with the owners and managers of private businesses. HarbourVest Partners completed a fund restructuring in 2016 and made an anchor LP commitment to Pemba’s latest fund, which reportedly closed at A$650 million the same year. Recent exit activity includes last year’s sale of heavy equipment specialist Heavy Maintenance Group to Malaysia’s Sime Darby.

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• Topics
• Australasia
• Trade sale
• Financials
• Australia
• Pemba Capital Partners
• insurance