Apax Partners and Morgan Stanley’s principal investment unit agreed to purchase Chicago insurance brokerage Hub International for about US$1.7 billion, Hub announced today, marking yet another private-equity move into the brokerage space.

Under the terms of the arrangement agreement, Hub shareholders will receive US$40 per share in cash, representing a premium of 28% to the 90-trading day average closing stock price on the New York Stock Exchange.

The transaction has been unanimously approved by the board of directors following the unanimous recommendation of a special committee comprised of disinterested directors. In doing so, the Hub board determined that the transaction is fair to the shareholders of Hub and in the best interests of Hub. The board also has determined to recommend to Hub shareholders that they vote in favor of the transaction. Merrill Lynch & Co. and Scotia Capital each provided a fairness opinion.

As permitted by the arrangement agreement, Hub may solicit proposals for alternative transactions from third parties until March 19, and will be permitted to continue negotiating with parties that have submitted proposals prior to such time. If Hub gives notice to terminate the arrangement agreement before noon on April 10 to enter into an alternative transaction, Hub would be obligated to pay a break-up fee of 1.25% of the equity value of the transaction (approximately US$21 million). However, there can be no assurance that this process will result in an alternative transaction. Hub does not intend to disclose developments with respect to the solicitation process unless and until its board of directors has made a decision.

Martin Hughes, Hub’s chairman and CEO, said, “We are excited that our new partners believe in our commitment to investing in our people and are dedicated to working with us to deliver the most value for our clients and colleagues.”

Mitch Truwit, Partner at Apax and head of Apax’s financial and business services group in the United States, said, “We believe Hub’s high quality team and franchise is a perfect match for Apax’s commitment to the financial and business services sector. From the outset, this transaction has been grounded in the opportunity to invest and partner with one of the best management teams in the industry.”

Michael Petrick, Managing Director at Morgan Stanley and global head of Morgan Stanley Principal Investments (MSPI), said, “Hub has established a leading position in the North American insurance brokerage market as a result of the dedication of its respected management team and efforts of its employees. Morgan Stanley, together with Apax, looks forward to investing in the continued growth of Hub.”

Merrill Lynch & Co. is acting as financial advisor to Hub and Shearman & Sterling LLP and Blake, Cassels & Graydon LLP are acting as legal advisors to Hub.

Scotia Capital Inc. is acting as independent financial advisor to Hub’s special committee and Goodmans LLP is acting as independent legal advisor to Hub’s special committee.

The transaction is subject to shareholder approval, Canadian court approval of the plan of arrangement, and other regulatory approvals including merger notification filings in the U.S. and Canada, as well as customary closing conditions. There is no financing condition to consummate the transaction.

The transaction will be financed through a combination of equity contributed by Apax, MSPI and members of management, and debt financing that has been committed by Morgan Stanley and Merrill Lynch & Co.

Senior members of Hub’s management team have already committed to invest in excess of US$65 million of equity in the transaction. Morgan Stanley and Merrill Lynch & Co. will act as joint lead arrangers and joint bookrunners on the acquisition financing. The transaction is expected to be completed toward the end of the second quarter of 2007.