MELBOURNE, Australia--Insurance Australia Group Ltd. (IAG.AU) said Monday it is buying the insurance underwriting businesses in Australia and New Zealand of conglomerate Wesfarmers Ltd. (WES.AU) for 1.85 billion Australian dollars (US$1.65 billion).
IAG said the deal is expected to increase its earnings slightly in its first year with a further 5% lift or more in the second year. Still, integrating the operations will cost the company about A$120 million.
IAG said it will fund the deal with a combination of equity, existing funds and debt, including a A$1.2 billion placement of new shares at A$5.47 a share.
Wesfarmers separately said it will hold on to its insurance broking operations in Australia, New Zealand and the U.K. It forecast a pre-tax profit of between A$700 and A$750 million on the sale.
Write to Robb M. Stewart at robb.stewart@wsj.com
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