Great Southern Bank has an agreement in place to sell its two wholly owned subsidiaries, Great Southern Travel and Great Southern Insurance, collectively netting the company nearly $7 million.
Through separate transactions, the Springfield-based bank is selling its 35-year-old travel division to Milwaukee, Wis.-based Adelman Travel and its 50-year-old insurance division to Clayton-based Huntleigh McGehee.
Great Southern Director of Retail Services Kris Conley, who currently oversees operations of both the travel and insurance divisions, said the moves allow the firm’s administrators to focus on what they know best.
“Our decision a few months ago was to truly focus on our core business, which is banking,” said Conley, who had managed Great Southern Travel for 15 years. “We were approached by HM out of St. Louis, which has been a customer of Great Southern for some time, about whether we’d be interested in selling the insurance company. That started the conversations.”
He said HM first approached Great Southern in May with an interest in buying the insurance division which manages 5,000 clients. The bank’s board of directors approved a directive to enter into negotiations with HM and for Conley to see if it could find a seller for the travel division. With the growth of Great Southern’s banking operations in recent years – to 107 branches in six states from 39 in Missouri three years ago – Conley said the timing was ideal. “We had to look at how we best utilize our resources and focus on what we do best,” Conley said. “This was certainly not a decision that was made out of necessity or desperation.”
For the 12 months ended Sept. 30, Great Southern reported its travel and insurance divisions produced a combined $8.2 million in noninterest income, $7.2 million in noninterest expense and $739,000 in net income, with diluted earnings per share of 5 cents.
Leisure spaceDuring the last three years, Great Southern Travel’s gross sales and net income have both increased by more than 20 percent, Conley said. He said gross sales across the travel division’s 12 offices were projected to top $90 million in 2012.
“I think on the leisure side there has been some pent-up demand,” Conley said.
Steve Cline, chief operating officer for Adelman Travel Group, said the acquisition allows the largely corporate-focused Adelman to enter the leisure travel space. He said about 95 percent of its current business stems from corporate clients. Great Southern Travel’s business is – about 15,000 total clients – evenly split between corporate and vacation travelers, though the latter segment has largely fueled recent revenue growth.
Cline said the move would increase Adelman’s employment by one-third to roughly 300 employees. Michael Detrick currently manages Great Southern Travel and will remain in charge of its offices across Missouri, Arkansas, Kansas and Iowa.
“In most acquisitions, there are redundancies. With this, there will be no reductions in staff functions or territory,” Cline said, adding that it expects to keep 100 percent of the Great Southern Travel staff and in the next few months could add up to a dozen positions, mostly filling administrative roles.
The Great Southern deal – Adelman’s largest acquisition – caps a series of moves this year designed to increase revenue, Cline said. Alongside a recently inked co-branding agreement with San Diego-based conference planning agency Summit Performance Group and the development of a new video-conferencing product dubbed VideoTravel, Adelman expects its more than $400 million in estimated 2012 revenue to increase by 25 percent in 2013.
In synchConley said about six months ago he approached Innovative Travel Solutions Inc., an Alpharetta, Ga.-based broker, to see if the company could “discreetly test the waters.” From there, Adelman learned about the opportunity, and began to enter into negotiations.
Though the parties involved declined to disclose individual purchase prices, Great Southern confirmed the total value of the combined acquisitions was $6.8 million. Asset transfers are scheduled Dec. 1 to HM for the insurance division and Dec. 3 to Adelman for the travel division.
“These were two totally separate transactions that synched up in the end and worked very well for us,” Conley said, adding that the bank’s internal resources have been stretched with recent acquisitions of Ellington-based Sun Security Bank in October 2011, Kansas-based Team Bank in March 2009 and Iowa-based Vantus Bank in September 2009.
HM CEO Mike Shanahan Jr. said Great Southern Insurance is a good cultural fit for HM, and its client base is an untapped resource.
“I am a big fan of [Great Southern CEO] Joe Turner and the team he has built at GSB. We share the same client-first mentality,” Shanahan said via email while on business in Cabo San Lucas. “The Springfield-southwest market is full of successful businesses. We want to partner with these companies and help make them more efficient from an insurance perspective. I think they will appreciate our no-nonsense approach as we are an all-cards-on-the-table company.”
Conley said insurance division revenues have been flat in recent years at around $15 million, but that revenue represented about $1.5 million in commissions for the bank.
“The insurance decision was very easy for us because hooking up with a larger insurance agency like HM is really going to open up some doors for our customers both with personal insurance and corporate,” Conley said.
Shanahan said he expects the acquisition should boost the company’s 2013 revenues by as much as 20 percent, but he declined to disclose revenue figures. Great Southern Insurance Manager Mark Roberts will remain in his position, officials said.
Founded in 1991, HM serves clients in all 50 states and around the globe, according to
HMRisk.com. Shanahan said there would be no employment changes as a result of the transaction.
Great Southern’s parent, Great Southern Bancorp Inc. (Nasdaq: GSBC), which has assets of $4.1 billion, posted third-quarter earnings of $7.1 million.
