Michael Dell family office to acquire insurance broker Baldwin
The FT broke the story that Michael Dell’s family office would lead a $7.7 billion deal to take Baldwin private / Photo: ryanmiller / Shutterstock.com
Shares of insurance broker Baldwin Insurance Group rose 7.8% on Monday even as the broader market declined. This came as a consortium led by DFO Management, the family office of Dell founder and CEO Michael Dell, plans to acquire the company for almost $8 billion.
Details
An investment consortium led by DFO Management, one of the world’s largest family offices, is close to striking a deal to buy the insurance broker, the Financial Times reported, citing sources. The deal would take Baldwin private. It has not yet been officially announced (after this story was published, an announcement was made.)
According to the FT’s sources, Baldwin would be valued at $32.50 per share, with the transaction worth approximately $7.7 billion. The price implies a premium of almost 90% to the company’s valuation in June, when reports first emerged that Baldwin was exploring a sale, the FT writes.
Implications of the deal
The acquisition of Baldwin would mark a rare full-blown leveraged buyout led by DFO, the FT noted. DFO Management is pursuing the acquisition together with Sequence Holdings, a tech group launched earlier this year that specializes in deploying technology at service businesses. To improve their performance, Sequence’s engineering team works directly with the management of the companies. The Dell-led consortium prevailed over several large private equity firms in the contest for Baldwin, according to the FT.
Baldwin specializes in commercial insurance brokerage: it helps midsized and large businesses shop for coverage for a range of risks, from cybersecurity and employee benefits to real estate. Its second-quarter revenue rose 30% year over year to $492.9 million, while organic revenue growth was 2%. Adjusted EBITDA increased 37% to $116.7 million. Meanwhile, the company posted a GAAP net loss of $39 million, or $0.42 per share.
During the quarter, the company spent another $80 million to buy back approximately 4 million shares, while net debt stood at approximately 4.5 times EBITDA at the end of the period.
What analysts say
Baldwin shares have gained almost 23.4% year to date. Among the 11 Wall Street analysts covering the company, there are seven “buy” calls versus four “hold” ratings. The average target price is $32.22 per share, implying 8.7% upside from the close on Friday.
