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Bid for insurance company

Esure tycoon Wood poised for £360m payday

Sir Peter Wood pic Esure

Sir Peter Wood: windfall (pic: Esure)


 

Insurance tycoon Sir Peter Wood is poised for a £360 million windfall after the company recommended the £1.17 billion sale of Esure to a US private equity firm.

Bain Capital has offered 280p a share for Esure which Wood set up in 2000, 15 years after breaking the insurance mould when he established Direct Line.

The board of Esure today said it would be recommending the all cash offer, representing a premium of approximately 37% to the closing price per Esure share of 204p on 10 August.

In light of the proposed acquisition, the board is not recommending the payment of an interim dividend (1H 2017: 4.1p per share). 

The update on the offer came alongside figures showing a fall in profit before tax to £36.1 million (1H 2017: £45.1m).The figure included an impact of £14m from adverse weather related claims costs. Excluding these costs profit before tax was £50.1m (1H 2017: £45.1m).

Sir Peter Wood, chairman, said: “The first half of 2018 demonstrates that Esure continues to deliver profitable growth and it is pleasing to see that we have grown our market share in motor during this period. 

“Alongside these results, I’m pleased to be announcing the proposed acquisition today, because it is a great outcome for shareholders, for the company, and for customers.

“Since its IPO in 2013, esure has grown to nearly 2.5 million in-force policies, delivered more than £800m of annual gross written premiums, and returned just under £300m to shareholders in dividends as well as the considerable value delivered to shareholders through the demerger of GoCompare.”

The 71-year-old has a 30.7% stake in Esure which provides insurance products to more than two million drivers, homeowners, pet owners and holidaymakers across the UK. It owns the Sheilas’ Wheels brand targeting low-risk female drivers.

Martin Hughes, the hedge fund boss known as ‘The Rottweiler’, is the second biggest shareholder through his investment vehicle Toscafund. His 17% stake would entitle him to £200m.

Shares in Esure leapt 31%, or 63.2p, to 267.2p as news of the bid broke yesterday.

Wood broke the mould

Direct Line cut out the middleman – the insurance broker – and sold car insurance directly to customers by phone.

The venture was underwritten by Royal Bank of Scotland and was so successful that within nine years it had grown from nothing to become the biggest insurer of private vehicles in the country,claiming three times as many customers as the Royal Bank itself.

Wood did not have a capital stake in Direct Line, having sold it to the Royal Bank in 1988 in return for a generous performance-related remuneration. It proved to be a prescient deal, as the company’s rapid rise led to his becoming Britain’s highest paid company director, wth a pay packet of and £18.2m in 1993.

The serial entrepreneur, who has homes around the world, is thought to have a personal fortune of around £800m.

He made £198m when Esure listed on the stock market in 2013 and is chairman of price comparison website Go Compare, in which he has a 25.64% stake worth £129m. Go Compare was spun out of Esure in 2016.

The talks with Bain Capital follow months of speculation that Wood was looking to sell his stake in Esure, and under takeover rules, Bain has until 10 September 10 to table a firm offer.



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