Brit Insurance Board agree £850 Million (US$1.3 Billion) Offer
By Thomas | Published September 20, 2010
London based insurance company, Brit Insurance, is recommending acceptance of an offer by private equity groups Apollo Global Management and CVC Capital Partners Ltd which would conclude an acquisition proposal under discussion since June this year.
Brit Insurance – which specializes in the major insurance and reinsurance business – has finally decided to recommend to its shareholders acceptance of an approach by Apollo Management and CVC Capital Partners. The bid is valued at £850 million (US$1.3 billion), with the potential for a further 2.3% increase in value if certain targets are achieved. The original bidders Apollo Management teamed up with CVC Capital – a UK based private equity firm – to offer Brit Insurance shareholders £10.75 (US$16.8) per share, which could rise to £11 (US$17.3) per share depending on end of year asset values. Without the 25 pence per share increase, the deal will be worth £850 million (US$1.3 billion).
Brit Insurance is a holding company writing it’s direct and reinsurance business through Lloyds of London. Brit Insurance Limited trades off the London Stock Exchange with a share price that has ranged between £7.20 (US$11.2) and £10.05 (US$15.7) on the FTSE 250 index over the last twelve months.
The Lloyd’s of London insurers provide insurance cover against large-scale risks including natural disasters and have been stalked as potential takeover targets for several months, reflecting the pressure on its historical share price due to relatively low insurance premium levels.
US group Apollo Global Management originally offered £10 (US$15.3) per share in June 2010 for Brit Insurance, increasing it to £10.50 (US$ 16.06) per share. The company initially rejected the approach arguing that the valuation was too low, but agreed to open its books for due diligence in July 2010.
A separate, individual advance was originally made by Apollo Global for Brit Insurance, but it become apparent that the private equity firm would struggle to meet the Brit Insurance board’s valuation. This lead to UK private equity firm CVC Capital joining forces with American based Apollo Global Management in order to generate sufficient funds for the potential takeover.
The finalization of the deal is subject to further due diligence by both private equity firms and is dependent on Brit Insurance shareholders acceptance of the bid tabled and regulatory approval. All parties involved in the deal have agreed the 15th October 2010 as deadline date for resolution of the remaining pre-conditions.
Private equity firms have invested in the region of $103 billion in company buyouts worldwide in 2010; this compares with $44 billion generated during the same period in 2009. Private equity company investment has been leading the way in financial recovery since the world financial crisis took effect in late 2008, particularly in emerging and developing markets.
Financial service companies globally have become increasingly attractive takeover ventures for private equity firms. Scope for company mergers and acquisitions has been heating up since world financial markets stabilization over the past 18 months. It is estimated there is currently US $1 trillion liquid capital available for company acquisitions and mergers.
If the takeover is a successful, Apollo Global Management and CVC Capital Partners Ltd will capture an expert international general insurance and reinsurance specialist, with a diverse portfolio of over 70 class protection products. Brit Insurance has offices in Europe, North America, Asia and Australia.
Brit Insurance posted net income of £67.4 million (US$103.1 million) in June 2010 for the first six months trading activity; a significant improvement on the comparable position in 2009, when a loss of £6.3 million (US$9.8 million) was made. The valuation recognizes Brit Insurance liabilities in respect of large claim estimated at US$71 million (£45.3 million) towards the Chilean earthquake in February 2010.
In 2008, the United Kingdom insurance industry was the largest in Europe and the third largest in the world. It is comprised of more than 970 companies generating net premiums amounted to £33.8 billion (US$ 51.7 billion); the three main sectors being motor insurance £10.7 billion (US$ 16.3 billion), property insurance £8.8 billion (US$ 13.4 billion) and accident & health insurance £4.6 billion (US$ 6.9 billion). The insurance industry has mostly weathered the recent financial crises and is expected to strengthen and remain one of the global financial sector leaders.
Brit Insurance Holding
Brit Insurance Holdings is a general insurance and reinsurance group, provides commercial insurance products. The company offers accident and health, contingency, marine, aerospace, professional risks, trucking, commercial motor, liability, personal lines, property and packages, small business, war and terrorism, and horses insurance policies. It also provides agriculture, casualty, marine, aviation, and property reinsurance policies.
Apollo Global Management
Apollo Global Management (“Apollo”) is a contrarian, value-oriented investors in private equity, credit-oriented capital markets and real estate. Apollo raises, invest and manage funds on behalf of some of the world’s most prominent pension and endowment funds as well as other institutional and individual investors.
CVC Capital Partners Ltd
CVC Capital Partners (‘CVC’) was founded in 1981 and is a leading global private equity and investment advisory firm, with it’s headquarters in Luxembourg with a network of 20 offices across Europe, Asia and the USA.