People's United Arm to Divest PUIA in $120M All-Cash Deal
People’s United Financial’s (PBCT) banking subsidiary People's United Bank has signed an all cash deal worth $120 million to divest People's United Insurance Agency (“PUIA”) to AssuredPartners. The deal is expected to close in the fourth quarter of 2020.
The concerned unit operated as a full-service insurance brokerage and insurance firm through which People’s United provided commercial and personal along with employee benefit insurance solutions.
AssuredPartners acts as an independent insurance agency that acquires and invests in insurance brokerage businesses across the U.S. and the U.K. It offers property & casualty, risk management and personal insurance, in addition to employee benefits.
The agreed purchase price is a 3.7x multiple of last 12 months’ revenues. Notably, with this transaction, People's United seeks to free resources that otherwise would have been kept invested in PUIA.
Jack Barnes, chairman and chief executive officer of People's United Bank said "It also allows us to focus additional resources on delivering core banking products and services, and to further enhance digital offerings across our commercial, retail and wealth management businesses.”
Our Take
People’s United continues to benefit from a healthy business portfolio that has grown inorganically over time. Since 2016, the company has maintained its acquisition spree, fortifying footprint in various areas. Also, it has diversified its revenue sources, which are likely to keep supporting the bank’s financials.
However, persistent pressure on margins from low rates and escalating expenses might restrict its bottom-line growth in the near term.
Shares of People’s United have lost 12.7% over the past six months against the 4% rally of the industry.
Currently, People’s United carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Amid coronavirus-induced economic slowdown, several financial firms are undertaking initiatives to focus on core businesses. In July, Hilltop Holdings Inc. HTH concluded the sale of its wholly owned subsidiary — National Lloyds Corporation — to Align Financial Holdings, LLC.
In August-end, Midland States Bancorp, Inc. MSBI divested the commercial FHA origination platform to Dwight Capital, a nationwide mortgage banking firm based in New York. Also, CIT Group CIT sold the trust and wealth advisory business to Sunflower Bank, N.A., a subsidiary of Denver, CO-based FirstSun Capital Bancorp.
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