AUB Group Ltd (ASX: AUB) shares are in the headlines on Thursday.
That's because the insurance broker has just made a big announcement.
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Why is everyone talking about AUB shares?
This morning, AUB requested a trading halt so that it could undertake an equity raising after cancelling its joint venture plans with PSC Insurance Group Ltd (ASX: PSI).
According to the release, the company is looking to raise $150 million through a fully underwritten institutional placement at $24.00 per new share. This represents a 7.2% discount to where AUB shares currently trade.
In addition, the company is running a non-underwritten share purchase plan for retail shareholders at the same price.
Why is the company raising funds?
AUB has decided not to proceed with the previously announced joint venture of Tysers UK Retail with PSC Insurance.
Management notes that Tysers UK Retail is a highly attractive business with meaningful scale, deep client relationships, and strong organic and inorganic growth potential. It believes that owning 100% of the business will enhance AUB's strategic alignment with the rest of Tysers and AUB, with increased cross-sell opportunities.
AUB was due to receive $100 million from PSC Insurance under the joint venture. However, given that it is not proceeding, management has decided to raise funds to increase financial flexibility and balance sheet strength. This will allow the company to capitalise on its attractive and value accretive bolt-on acquisition pipeline.
Guidance update
It certainly is an opportune time to raise funds. That's because AUB has also raised its profit guidance this morning, which is likely to go down well with investors.
Thanks to strong performance across all divisions, AUB has lifted its FY 2023 underlying net profit after tax guidance to be in the range of $120 million to $124 million. This compares to its previous guidance of $112.9 million to $121.4 million.
Management notes that the core business in Australia and New Zealand continues to perform strongly and Tysers is continuing to perform ahead of expectations with strong business momentum.
AUB's CEO and Managing Director, Mike Emmett, said:
We are extremely pleased to provide updated profit guidance, which is reflective of the continued excellent performance of all parts of AUB. Tysers continues to perform ahead of expectation with cost synergy delivery on track and revenue synergies to flow in FY24. The business is pleased to be retaining 100% of Tysers UK Retail.
It is a high performance business which continues to demonstrate attractive profitability and is strategically aligned with AUB's Retail broking expertise. I would also like to compliment PSC for the professional and accommodating approach it has adopted throughout the process, respecting that the parties have been unable to reach an outcome that aligns to each Group's strategic objectives.
