Cadence Bank (CADE) announced Tuesday that it entered into a definitive agreement to sell its insurance operations, Cadence Insurance, Inc., to Arthur J. Gallagher & Co. (AJG) for $904 million in cash.
In pre-market activity on the NYSE, Cadence Bank shares were gaining around 4.2 percent.
Cadence Bank said the sale of its insurance brokerage business is expected to be slightly positive to earnings per share through the use of cash proceeds to reduce wholesale borrowings.
Cadence anticipates the deal to close in the fourth quarter of 2023, subject to standard closing conditions. Following the sale, Cadence Insurance executive leadership, management and employees will join Gallagher.
On an after-tax basis, the immediate net capital increase is expected to be approximately $620 million and net cash proceeds are estimated at $650 million.
According to the bank, the sale of Cadence Insurance will allow it to capitalize on the valuation premium and reinvest the capital into its strategic transformation efforts and growing its core banking franchise.
Meanwhile, Gallagher expects the acquisition to expand its property/casualty and employee benefits presence across several states in the Southeast and Texas. It will also broaden its capabilities across multiple niche practice groups, including Construction, Real Estate, Manufacturing, Healthcare, Professional Services and high-net-worth personal lines.
As part of the transaction, Gallagher will become the preferred insurance broking partner of Cadence Bank.
In the deal, Morgan Stanley & Co. LLC, MarshBerry, and Ernst & Young served as financial advisors to Cadence.
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