B.p Marsh Regulatory News (BPM)

Date: 1 September 2021

B.P. Marsh & Partners Plc

("B.P. Marsh", "the Company" or "the Group")

Investee Company Disposal - MB Prestige Holdings PTY Limited

B.P. Marsh & Partners Plc (AIM: BPM), the specialist investor in early-stage financial services businesses, is pleased to announce that MB Prestige Holdings PTY Limited ("MB"), the Sydney headquartered prestige motor vehicle Managing General Agency ("MGA"), has been acquired by ATC Insurance Solutions PTY Limited ("ATC"), the Melbourne headquartered MGA and Lloyd's Coverholder, in which the Group is also a shareholder. 

Transaction

ATC has agreed to acquire 100% of MB for a total consideration of AU$17m (c. £9m), with the consideration being paid in a combination of cash and equity in ATC. The cash proportion of the transaction was financed out of ATC's cash reserves. 

B.P. Marsh has agreed to sell its 40% equity stake in MB for AU$6.8m (c. £3.57m), for which the Group will receive newly issued shares in ATC. 

The Group currently has a 20% shareholding in ATC, which will increase to 25.5% following ATC's acquisition of MB. 

As at 31st January 2021, B.P. Marsh valued its 40% shareholding in MB at AU$5.7m (c. £3.2m). Therefore, this transaction represents a circa 20% uplift over the Group's latest published valuation of MB. 

Additionally, it represents an Internal Rate of Return of 29% since the Group's original investment in MB in 2013 (inclusive of all income and fees), and a multiple of equity invested of almost 9 times.

This takeover has valued ATC at AU$76m (c. £40m), resulting in a post transaction valuation for both businesses of AU$93m (c. £49m). This implies an increase of AU$5.8m (c. £3m) over the Group's combined valuations of ATC and MB, as at 31st January 2021.

Daniel McNamara, the current Managing Director of MB, will also receive shares in ATC as consideration for his 7.5% shareholding in MB. He will join the management team at ATC, whilst also remaining Managing Director of MB.

Daniel Topping, the Company's Chief Investment Officer, will remain as the Group's nominee Non-Executive Director on the Board of ATC.

Investment in MB

In December 2013, B.P. Marsh partnered with MB's Management team to finance the management buy-out of another institutional shareholder, the Australian Private Equity Firm, Ironbridge. The Group invested AU$0.8m (c. £0.4m), for a 40% equity position.

In addition to the equity investment, B.P. Marsh provided MB with loan funding of AU$1.4m (c. £0.78m) which was repaid in full by June 2020.

Since B.P. Marsh invested, MB has seen significant growth, in both premium income and EBITDA. 

Rationale for the Transaction

The Group saw the potential for these investments to combine as a transformational opportunity for both companies, creating one of the largest independent underwriting agencies in Australia, handling gross written premium of circa AU$125m (c. £66m), and unadjusted EBITDA of over AU$6m.

Whilst providing the option for longstanding shareholders in MB to exit, it also allowed the team and B.P. Marsh the chance to roll up equity into ATC, thus enabling them to continue to participate in the combined group's exponential growth potential.

B.P. Marsh made its original investment in ATC in July 2018, investing AU$5.1m (circa. £2.8m) for a 20% equity stake. Since then, ATC has grown its premium income from $59.3m in 2018 to $93.6m in 2021, as well as expanding into several new product areas. 

Following the completion of this transaction ATC has also arranged a growth finance facility with National Australia Bank Limited, to further support the development of the enlarged company. 

COMMENTARY

Chris Anderson, ATC's CEO, stated:-

"MB are highly respected in the prestige motor insurance space. MB's underwriting and financial performance has been very strong for many years. ATC are delighted with the acquisition and look forward to working with Daniel McNamara and his team."

Daniel McNamara, Managing Director of MB, stated:-

"MB are excited to be joining the ATC Group and look forward to working with Chris Anderson and his team into the future. We've been fortunate to have enjoyed a productive working relationship with B.P. Marsh through its long term shareholding in MB and are pleased to be able to continue that relationship as part of the ATC Group."

Commenting on this, the Group's Chief Investment Officer, Dan Topping stated:-

"B.P. Marsh has worked closely with MB over the last 8 years to assist in the growth of their business.

This transaction demonstrates B.P. Marsh's unique flexible approach to investing in the financial services sector, in terms of both size and structure. Our investment in MB has delivered an Internal Rate of Return of 29% since 2013, increasing the equity value of our investment from circa £400,000 to circa £3.57m. We have also been able to increase our shareholding in ATC to 25% and we are pleased to be part of the future of the enlarged company.

We wish those departing MB as part of this transaction the very best and look forward to continuing to work with Daniel McNamara, and the team at ATC."

Notes to Editors:

B.P. Marsh's current portfolio contains seventeen companies. More detailed descriptions of the portfolio can be found at www.bpmarsh.co.uk.

Since formation over 30 years ago, the Company has assembled a management team with considerable experience both in the financial services sector and in managing private equity investments. Many of the directors have worked with each other in previous roles, and all have worked with each other for approaching ten years.