Consolidating its position in Africa,
Marsh & McLennan Companies Inc.
) globally leading consulting wing by market value, Mercer,
announced its intention to acquire 34% stake in Alexander Forbes -
a leading firm in retirement, investments and employee benefits
sectors across South- and Sub-Saharan regions of Africa.
While the value and other details of the deal remain
undisclosed, Mercer's total stake should be around $366 million,
Alexander Forbes' business is spread over 11 countries in
Africa. The firm offers a wide array of services that include
employee benefits, insurance, retirement and investment consulting
solutions for both institutional and retail clients.
However, Mercer has agreed to purchase about 14.9% stake in
Alexander Forbes at the latter's initial public
offering (IPO) on Johannesburg Stock Exchange (JSE), slated to
occur at the end of Jul 2014. The remaining 19.1% interests will be
bought after the receipt of regulatory approvals.
Growth through Expansion
This is not the first time thatMarsh & McLennan is building
business through Alexander Forbes.In Jan 2012, Marsh &
McLennan's leading insurance brokerage wing - Marsh Inc. - had
acquired Alexander Forbes' brokerage business (Alexander Forbes
Risk Services) for about $115 million.
The deal complements the strategic growth goals of both Marsh
& McLennan and Alexander Forbes. Alongside, the collaboration
with a globally leading consulting firm will enhance the latter's
operational efficiencies and enable its clientele to tap the
lucrative global markets outside of Africa, where Mercer enjoys a
On the other hand, the deal blends well with Mercer's scale and
utility of operations. While the pension benefits and healthcare
are witnessing a shift from the public to the private sector in
Africa, it is also opening up sizeable growth opportunities within
Mercer's pensions, health and benefits, investment and talent
Last year, Mercer also acquired South Africa's leading
information provider of compensation and benefits survey data and
rewards - Global Remuneration Solutions Ltd. These acquisitions
will add to Mercer's client base.
Absence of Major Risks
We believe that the acquisition is crucial for new business
production and client retention, thereby strengthening competitive
edge in the peer group. Marsh & McLennan also remains
financially sound, further eliminating any significant risk on
leverage. The minimal adverse impact is reflected in Marsh &
McLennan's share price that remained stable in the neighborhood of
$52.00 since the announcement.
Currently, Marsh & McLennan carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the financial sector include
Blue Capital Reinsurance Holdings Ltd.
American Express Co.
Erie Indemnity Co.
), all of which bear a Zacks Rank #2 (Buy).
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