The Kelly Partners (ASX: KPG) share price has lifted today after the company announced a partnership with AUB Group. Let’s take a closer look.
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In the deal, Austbrokers (owned by AUB Group) will offer insurance products to Kelly Partners’ clients, while Kelly Partners will provide accounting services to Austbrokers’ clients.
In early trade, the Kelly Partners share price surged up 8% to $1.76 before retreating to $1.70, up 4.29%, at the time of writing. The AUB Group share price rose slightly at open but is now trading flat at $17.02.
Details of the deal
The companies announced that a new operation, called ‘Austbrokers Kelly and Partners’, will market and deliver insurance broking services to Kelly Partners’ 8,000 members and clients.
This new operation will be owned 50% by AUB, and 50% by a Kelly Partners controlled entity.
In the reciprocal agreement, Kelly Partners will provide accounting and tax services to Austbrokers’ 700,000 clients and members.
Given the much larger size of the AUB Group, the deal seems to have provided more benefits to Kelly Partners.
Kelly Group’s chief executive welcomed the joint venture, saying that the “partnership will significantly grow the company’s client base and revenue streams”.
What’s happening at AUB Group?
AUB chief executive Mike Emmet said the partnership was a “natural next step in the relationship between two organisations with similar DNA”.
AUB Group will reinvest 50% of the partnership profits back into the combined operations. However, it does not anticipate the new partnership to result in a material uplift in its underlying net profit after tax for FY21.
Today’s announcement follows the company’s recent active expansion of its revenue base. Just two days ago, AUB Group announced its acquisition of 360 Underwriting Solutions for $127 million. AUB said that the deal would allow the company to strengthen and expand the scale of its agencies business.
Share price movements in 2020
The AUB Group share price has increased by 85% since its low of $9.20 back in March. The share price is 40% higher on a year-to-date basis, and has a 52-week high of $18.10.
Meanwhile, the Kelly Partners share price has risen by 76% this year, and is currently closing on its 52-week high of $1.79.
Based on the current share prices, AUB Group commands a market capitalisation of around $1.2 billion, while Kelly Partners has a market value of $74 million.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.