Good evening,

There’s the perfect M&A target for ASX-listed QBE Insurance hiding in plain sight.

Sources told Street Talk the £4.4 billion ($8.5 billion) specialist insurer Beazley Plc has been the subject of intense pitching by investment bankers close to the $27 billion insurer. While sources said the bankers had failed to make purchase with QBE boss Andrew Horton and his board, it is understood their idea led to a bunch of high-level conversations around the merits of such a transaction.

It is a business that Horton would know well. He spent close to two decades among its management ranks, and was chief executive for nearly 13 years before arriving in Australia in 2021. Beazley’s share price is trading at all-time highs since its 2002 float.

Horton has been clear about QBE’s strategy, however, since he landed at the insurer. He’s all about organic growth, just like fellow British expat Patrick Snowball wanted when he arrived at Suncorp. QBE has also spent the better part of the past decade unwinding a handful of poor acquisitions executed under former chief executive and renowned deal junkie, Frank O’Halloran. While O’Halloran made more than 100 acquisitions and bulked up QBE significantly over his 14-year reign, some didn’t quite pan out as planned.

If Horton does have an interest in pursuing M&A – and Street Talk is not suggesting a deal is afoot, or that bankers have been engaged – he’d have to offer a premium of around 35 per cent to pin down Beazley. That would put the deal at about $10 billion.

And even then, Horton would need a bullet-proof reason for a big acquisition. That’s because it would require a chunky equity raise, and fund managers have seen too many Australian financial players burn their fingers (and shareholder value) chasing inorganic growth overseas – just look at Perpetual.

Goldman Sachs and JPMorgan advised on QBE’s last equity raise in 2020, which saw it raise $1.2 billion. No doubt they would be happy to help on this matter.

Read the full story tomorrow and more on the Street Talk page.

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