Pat Ryan’s RSG stake worth as much as $3.5bn on indicative IPO pricing

Ryan Specialty Group (RSG) chairman and CEO Pat Ryan’s stake in the fast-growing wholesale broker and underwriting platform he founded could be worth as much as $3.5bn based on the top of the indicative pricing range for its IPO.

Pat Ryan – RSG

Added to shares held by Ryan and his wife valued at $5.9bn in Aon – which he also founded and built – the industry entrepreneur has amassed a paper fortune in the firms that is now close to $10bn.

The RSG figure is based on pre-float Class A and Class B shares held by Ryan and his wife and those attributed to them related to family trusts.

On that basis Ryan currently owns 12,326,440 Class A shares, representing 21.1 percent of the total outstanding, along with 126,747,648, or 72.0 percent of the Class B shares outstanding.

That means the veteran industry entrepreneur’s pre-IPO holding is equivalent to 54.4 percent of the 255,650,877 total stock units expected after the IPO.

The top end of the indicative pricing range of $22 to $25 a share would value RSG at $6.39bn, with the lower end valuing the business at $5.62bn.

That means Ryan’s 54.4 percent pre-IPO holding would be worth between $3.06bn to $3.48bn.

The S-1 filing for the IPO also revealed that the executive’s post-IPO stake is expected to drop to 12,208,523 Class A shares and 106,004,466 Class B shares.

Pat Ryan stake valued at up to $3.5bn on indicative IPO pricing

If the 20,861,099 shares are sold in the IPO that would represent $458.9mn to $521.5mn in gross proceeds.

The RSG stake is the second multi-billion-dollar fortune generated by Ryan in his insurance career after building and leading Aon before retiring from the firm in 2008. He formed RSG just two years later in 2010.

Individually Ryan remains the fourth largest shareholder in Aon with a 7.4 percent stake valued at $3.95bn. His wife Shirley owns a further 3.68 percent holding valued at $1.96bn.

The S-1 filing for Ryan Specialty also revealed that group president Tim Turner – who has led the wholesale brokerage business R-T Specialty since its inception – holds 6,299,910 Class B shares, valued at $157.5mn at the top end of the indicative pricing range.

Nick Cortezi, the former CEO of All Risks which was bought by RSG last year, owns 6,133,271 of Class B shares valued at $153.3mn at the top end of the indicative pricing range.

$6bn wholesaler

As previously reported, Ryan Specialty Group Holdings (Ryan Specialty) – the new entity set up to house RSG – launched its IPO yesterday and said pricing is expected to be in the range of $22.00 and $25.00 a share of Class A common stock.

At a midpoint of $23.50 that would raise net proceeds of up to $1.27bn, or $1.46bn including additional grants to underwriters of the offering, according to the S-1 filing with the SEC.

The midpoint price is also equivalent to a $6.0bn fully diluted market valuation for the wholesale broker and underwriting management specialist. The estimated net proceeds at the midpoint price is calculated after underwriting discounts and commissions and expenses.

The newly established Chicago, Illinois-based holding company for the intermediary said that it is offering 56,918,278 shares and intends to grant the underwriters of the IPO the right to buy up to an additional 8,537,742 shares.

JP Morgan, Barclays, Goldman Sachs and Wells Fargo are lead bookrunners on the IPO.

It intends to list its Class A common stock on the New York Stock Exchange under the symbol “RYAN”.

After the IPO, Ryan Specialty will be sole managing member of the existing Ryan Specialty Group LLC (RSG) and exclusively control all of its business and affairs.

In a statement, Ryan Specialty said it plans to use net proceeds from the sale of Class A common stock of $1.27bn – or $1.46bn if the underwriters choose to exercise their purchase option – to buy newly issued LLC units of RSG, buy out preferred stock in RSG held by PE firm Onex, and buy out other holders of outstanding LLC units in RSG.

Holders of Class A common stock will collectively own 100 percent of the economic interest of Ryan Specialty, and have a 6.7 percent voting power of the publicly traded company.

The LLC unit holders through ownership of Class B common stock will have the remaining 93.3 percent voting power in Ryan Specialty.

Ryan and certain members of his family and other entities he and his family control will have 70.9 percent of the voting power of Ryan Specialty’s outstanding capital stock.