B.p Marsh Regulatory News (BPM)

23 May 2023

B.P. Marsh & Partners Plc

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

Sale of Shareholding in Kentro Capital Limited ("Kentro")

B.P. Marsh and Partners Plc (AIM:BPM), the specialist private equity investor in early stage financial services businesses, is pleased to announce the disposal of its entire 18.7% shareholding in Kentro, subject to FCA approval being granted.

Highlights:

· £51.5m (net of all transaction costs) cash consideration expected to be received from the disposal of its 18.7% holding in Kentro, subject to regulatory approval

· Money multiple on Equity Investment of 3.41x

· Internal rate of return to B.P. Marsh of 25% (inclusive of all income and fees)

Sale of Shareholding in Kentro

B.P. Marsh agreed on 22 May 2023 to dispose of its shareholding in Kentro, the London-based insurance industry investment group, pursuant to an agreement by which Brown & Brown, Inc. ("Brown & Brown"), one of the largest US-based insurance intermediaries, has agreed to acquire the entire issued share capital of Kentro.

The Completion of B.P. Marsh's disposal of its 18.7% stake to Brown & Brown and of Brown & Brown's acquisition of the remaining interests in Kentro not owed by B.P. Marsh will be subject to, inter alia, the FCA's approval of change of control.

Background to the Investment

B.P. Marsh originally invested in Kentro (then known as Nexus Underwriting Management Limited) in August 2014, with an initial equity investment of £1.5m for a 5% shareholding.

B.P. Marsh has overseen Kentro's growth through a longstanding partnership and the further provision of £13.6m of capital, increasing its shareholding to 18.7%, Kentro's largest single investor. This investment, alongside bank financing, allowed Kentro to commence its acquisitive growth strategy, via both Nexus Underwriting Limited ("Nexus"), the underwriting (or "MGA") arm, and Xenia Broking Group ("Xenia"), the broking arm.

Since B.P. Marsh's first investment, Kentro has made 23 acquisitions, growing from Gross Written Premium of c.£55m in its year ending 31 December 2014 to now over £500m.

With B.P. Marsh's support, the underwriting arm, Nexus, underwrites across a diversified portfolio of 20 risk classes, through a network of over 800 retail broker partners in nine countries. Xenia is one of the largest retail trade credit brokers in the UK, with over 1,500 policyholders ranging from large corporates to SME customers. The collective Kentro team is composed of more than 350 insurance professionals operating from offices in the UK, US, Europe, Asia and Dubai.

The Transaction

Upon completion, the Group expects to receive £51.5m in cash (net of all transaction costs), which is consistent with the Group's most recent £51.5m valuation of the business as at 31 July 2022, underlining our approach to investment valuation.

Subject to completion, this would increase current funds to £55.2m after transaction costs and tax.

Dan Topping, the Company's Nominee Director on the Board of Kentro, will resign from this role on completion of the sale.

The investment and subsequent sale of the Group's holding in Kentro is another example of B.P. Marsh's successful strategy of investing for the long term, in start-up and early stage businesses with ambitious management teams. This allows the Group to work with management to help them grow their business, before disposing of its stake at a beneficial time for management and B.P. Marsh.

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

"It has been a pleasure to work with Colin Thompson and the whole team at Kentro over the past nine years and to see the business grow and flourish. The partnership with Brown & Brown offers an exciting future for them, and we wish everyone at Kentro every success.

"This investment and sale exemplifies our ability to identify niche opportunities and to back successful management teams and to successfully realise value for our shareholders. This disposal will deliver an Internal Rate of Return of 25% (inclusive of all income and fees) and a money multiple on the Equity Investment of 3.41x."

Colin Thompson, Kentro's Founder and CEO, commented:

"We have been incredibly privileged to have partnered with B.P. Marsh over the last nine years, a period of time that has seen transformational development and growth in this business. We are currently a business management in excess of £500m of GWP out of 9 countries and employing over 350 teammates. Our ability to build this platform would not have been possible without the guidance and support B.P. Marsh."

Use of Proceeds and Further Announcement

The Board of B.P. Marsh intends to continue to strike a balance between utilising funds for investment for long-term capital growth, whilst providing shareholders with a meaningful ongoing return.

Following the completion of the disposal, the Board anticipates that the Group's future investment opportunities and significantly enhanced cash funds should mitigate any reduction of income from Kentro (in the year ended 31 January 2022, Kentro contributed £1.0m to the Group's total income from investments).

Further information regarding B.P. Marsh's proposed use of the proceeds from this sale, and confirmation of the Group's ongoing strategy, will be announced to the market as soon as practicable.

Note

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018.

For further information:

Notes to Editors:

B.P. Marsh's current portfolio contains sixteen 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.

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