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KKR Agrees to Buy Blackstone's Alliant Insurance Brokerage

Source: Dow Jones

Posted on 26 Nov 2012 by Neilson

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Allliant purchasePrivate-equity firm Kohlberg Kravis Roberts & Co. (KKR) has agreed to buy Alliant Insurance Services Inc. from Blackstone Group L.P.  as the specialty insurance broker looks for capital to fuel its expansion.

Terms of the transaction weren't disclosed. The companies noted that the management team and employees of Alliant own about 45% of the company and will roll over "a substantial portion" of their investment. KKR and Alliant declined to comment on the management and employees' ownership after the deal.

Alliant's chief executive, Tom Corbett, said the deal offers his company an opportunity to continue to build its business.

"We are pleased to be partnering with KKR and appreciate the positive role that private capital can play in helping us manage our business and execute a growth strategy," he said.

Alliant has a history of partnering with private equity investors. Blackstone bought Alliant in August 2007 for $1.2 billion, taking over the stake from New York-based Lindsay Goldberg & Co. LLC, which owned Alliant jointly with the brokerage firm's management and employees between 2005 and 2007.

Alliant is the second investment KKR has made out of its new North American buyout fund. The fund started investing in September as the investment period of the predecessor 2006 Fund expired. It announced earlier this week to invest up to C$250 million ($250.8 million) in Calgary-based oil and gas company Westbrick Energy Ltd.

KKR's North American Fund XI, which began marketing to investors last year, had raised $6.2 billion at the end of September and should end up with $7 billion to $8 billion of capital when fundraising efforts conclude next year, KKR said. The 2006 Fund raised a total $17.6 billion.

Scott Nuttall, KKR's head of global capital and asset-management group, said during the firm's third-quarter earnings conference call earlier this month that he expects the pace of fundraising to pick up as the new fund seals deals.

"I don't think people are going to want to miss those," he said.

Based in Newport Beach, Calif., Alliant was the 12th largest insurance broker for U.S. businesses in 2011, according to trade publication Business Insurance. Its U.S. revenue increased 29% to $460 million last year, the trade publication said.

Targar Olson, a KKR partner, said KKR had been looking for acquisitions in the insurance brokerage space for the past three years or so, despite a decline in premium revenue that has reduced the amount of commissions that brokers can earn.

"The last eight to nine years, the insurance space has experienced declining pricing. This is a better time than most to expect stabilization, if not an increase, in pricing," he said.

Alliant provides property and casualty, workers' compensation, employee benefits, surety, and financial products and services to some 20,000 clients nationwide. The firm also caters to healthcare, energy, construction and other industries groups, and hopes to leverage on ties with KKR to sell products to KKR's portfolio companies, KKR said.

KKR is no newcomer in the insurance brokerage business. In 1998, the firm, together with a consortium of five insurance groups, paid $1.4 billion to take over U.K. insurance broker Willis Corroon Group PLC and floated it as Willis Group Holdings PLC (WSH) in 2005. Willis is now the third-largest insurance broker in the world, according to Business Insurance.

Mr. Olson said, like Willis, Alliant will be KKR's insurance brokerage platform. His firm intends to expand Alliant through a combination of organic growth and acquisitions.

KKR, which is known for its leveraged buyouts, had about $66.3 billion in assets under management as of Sept. 30.