LONDON (Alliance News) - FTSE 250-listed esure Group PLC confirmed on Tuesday it has agreed to be purchased by private equity firm Bain Capital, in a deal valuing the motor and home insurer at GBP1.21 billion.
The approach by Bain was first revealed by esure on Monday.
Under the offer, esure shareholders will be entitled to receive 280 pence per share, the same as mentioned on Monday. The offer represents a premium of 37% to Friday's closing share price of 204 pence, being the last business day prior to the commencement of the offer.
The all-cash offer has been unanimously recommended by esure's independent directors and accepted by its largest shareholder, Chairman Peter Wood, with 31%, and second largest shareholder, Toscafund, with 17%.
"Whilst the independent directors of esure are confident that esure is well placed to make good progress and deliver shareholder value, they believe that the proposed acquisition will deliver a number of strategic benefits to esure's business, including the opportunity to benefit from further investment by Bain Capital in a private context," the company said.
Wood, who founded esure in 1999, has agreed to stay on as chairman after the takeover and reinvest GBP50 million. He also founded large cap rival Direct Line Insurance Group in 1985.
"I'm pleased to be announcing this transaction today, because it is a great outcome for shareholders, for the company, and for customers," Wood said. "Since its IPO in 2013, esure has grown to nearly 2.5 million in-force policies, delivered more than GBP800 million of annual gross written premiums, and returned just under GBP300 million to shareholders in dividends as well as the considerable value delivered to shareholders through the demerger of GoCompare."
GoCompare Group PLC provides price comparison websites.
Added Robin Marshall, a managing director and co-head of Bain Capital Europe: "Sir Peter Wood is a towering figure in the industry and we would be delighted to be able to take the company that he and his team have built to the next level. We are excited that he will remain a minority shareholder in the company and also grateful that he will remain as chairman to facilitate a smooth transition to private ownership."
The company will not pay an interim dividend due to the takeover agreement with Bain.
In addition, esure said it saw continued growth in premiums and policies in a half-year period hurt by exceptional weather costs
For the half year ended June 30, gross written premiums were up 12% to GBP440.3 million from GBP393.3 million the year before. Pretax profit was down 20% to GBP36.1 million from GBP45.1 million last year due to weather related claims.
The poor weather included the so-called 'Beast from the East', which brought freezing temperatures and heavy snowfall in February and March.
In-force policies at group level rose 8.4% to 2.45 million compared to 2.26 million the year before.
esure reported a combined operating ratio of 100.9% compared to 96.6% the year before. Results under 100% is indicative of underwriting profitability.
"The group remains well placed to deliver profitable growth in 2018 and expects to deliver a combined operating ratio in the region of 98% to 99%, assuming normal weather for the remainder of the year. The group will remain disciplined in its rating actions as it targets 3 million in-force policies by 2020," the company added.
esure shares were up 3.8% at 277.27 pence on Tuesday. Direct Line shares were up 1.6%.
