* Deal worth $4.3 billion, including debt
* Caisse looking to diversify through private investments
* USI has been buying up smaller rivals
(Adds comments from interview with Caisse executive)
By Sweta Singh and Matt Scuffham
March 17 Private equity firm KKR & Co LP
and Canadian pension fund Caisse de dépôt et placement du Québec
announced plans on Friday to buy USI Insurance Services from
Onex Corp for $4.3 billion, including debt.
The deal is the latest in a string of mergers in the
insurance market, which has not grown quickly enough to support
"It's a sector we like," Caisse Chief Investment Officer
Roland Lescure said in an interview. "It's quite defensive, it
has high cash-flow generation, and it's a growing sector where
there is consolidation taking place."
The Caisse, Canada's second-largest public pension plan, is
buying businesses to help it diversify from public equity and
fixed income markets.
The pension fund, which has net assets of more than C$270
billion ($202 billion), wants to have 30 percent to 35 percent
of its investments in areas such as private equity,
infrastructure and real estate in the next four to five years,
compared with 28 percent currently.
"At a time when there are lots of fears and questions on the
potential protectionism and border adjustment tax," Lescure
said, "being exposed to small and medium companies is a safer
way of exposing yourself to the U.S. economy."
Valhalla, New York-based USI had net debt of about $1.82
billion as of Dec. 31 and generated 2016 earnings of $353
million before interest, taxes, depreciation and amortization.
USI provides insurance and employee benefit-related products
to smaller U.S. companies. Its staff of 4,400 operates from 140
offices throughout the United States.
Canadian private equity firm Onex bought USI in December
2012 for $2.3 billion from Goldman Sachs Group Inc's
private equity arm, funding $702 million of that through equity
and borrowing the rest, with debt placed on the company.
The biggest deal in the insurance brokerage sector last year
was the merger of Willis Group Holdings and Towers Watson. It
created Willis Towers Watson Plc, a company with a $17
billion market capitalization.
USI has been active in buying small regional rivals. It has
been trying to beef up USI One Advantage, an interactive
platform that helps it share information with sales consultants
sitting in offices around the United States.
KKR and the Caisse said they expected the deal to close by
the end of the second quarter.
($1 = 1.3361 Canadian dollars)
(Reporting by Sweta Singh in Bengaluru and Matt Scuffham in
Toronto; Editing by and Lisa Von Ahn)