Gallagher lines up potential $1.3bn stock issue to fuel M&A drive

Global broker  Arthur J Gallagher said it could resume financing its M&A binge with new equity issuance, filing to potentially issue up to 7 million new shares for unspecified M&A targets in the brokerage and risk management space.

Gallagher set itself up for at-the-market sales of up to 3 million shares from the sum in a programme with Morgan Stanley. Gallagher is not committed to proceed to any sale, management noted.

“We intend to use the net proceeds of sales under this programme to fund future acquisitions from time to time, yet can also be used for general corporate purposes,” management said in a statement.

At the $187.79 price at which shares last traded, a 7 million share block would represent $1.31 billion in potential gross proceeds.

The potential new share tally goes above and beyond the 2 million shares still available under an existing programme dating to 2016.

The move to potential for-equity financing defies some prior management guidance, but could confirm recent management hints that the M&A pipeline has heated up.

Gallagher CFO Doug Howell has consistently said that the group has a war chest of about $4 billion for M&A through end-2023 and had repeated at least through early 2022 that the figure meant not reaching for equity.

But the pipeline has since deepened. By September, Gallagher had upped its count of term sheets signed or in preparation to nearly 50 firms representing over $400 million in annual revenues. That sum was up by about a quarter from the prior reading end-July.

“I'd like to see us doing more and more M&A every day,” CFO Howell said during the Q3 earnings call.

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