AmTrust Shares Rise After Evergreen Parent Sweetens Bid

Shares of AmTrust Financial Services, Inc. AFSI gained 3.3% in the last trading session after the acquisition offer price was raised 9.3% or $1.25 per share. Evergreen Parent will buy 45% of the company’s stake, which Karfunkel-Zyskind Family does not own at present for a new purchase consideration of $14.75. The deal is valued at $2.95 billion and is estimated to culminate in the second half of 2018, subject to closing conditions

The new offer represents 45% premium to the closing price on Jan 9, 2018. This is the second time the offer is revised upward for the company. Earlier in March, the original offer price was sweetened to $13.50 in cash for each share held, up from the $12.25 per share. The Karfunkel-Zyskind Family had earlier announced its intention to acquire AmTrust’s shares on Jan 9, 2018.

AmTrust has been pursuing strategic initiatives to help accelerate its growth profile. The company expects this acquisition to likely help deepen its focus on long-term growth objectives rather than concentrating on short-term results given that the company is transitioning into a private entity.

AmTrust’s leadership position in commercial small business space, expansion of other segments and an impressive inorganic growth story place it strongly for growth. It also aims at making investments with potential to reap returns in line with the sector.

Shares of AmTrust have outperformed the industry since the acquisition was announced. The stock has soared 43.4% versus the industry’s 2.7% decrease.

 

Insurers Following Suit
    
Chasing the organic growth route, ramping up one’s operational profile seems a well-accepted strategy adopted by insurers as acquisitions set a prominent trend in the insurance domain. The insurance industry has been grabbing attention of late with a bout of consolidations backed by its available capital resource, which remains at an all-time high.

Recently, Brown & Brown, Inc. BRO acquired Servco Pacific Insurance operations in Hawaii and the Pacific Northwest region to expand and boost its brokerage services portfolio. Arthur J. Gallagher & Co. AJG purchased Pronto Insurance to add capabilities for the evolving Hispanic market. Earlier, Alleghany Capital Corporation, a wholly-owned subsidiary of Alleghany Corporation Y, informed that its unit Jazwares, LLC bought Russ Berrie and Applause brands.

Zacks Rank

AmTrust carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.    

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