Scottish broker expected to shelve flotation plans as deal with new backer builds war chest
Aviva will sell its investment in Giles Insurance after only five months, as private equity firm Charterhouse was this week poised to buy a major stake in the broker.
The deal is thought to value the Scottish broker at approximately £185m, and is expected to inject tens of millions into Giles Insurance’s acquisition war chest.
It was not clear this week what the size of Charterhouse’s stake would be, although sources suggested it could be most of the business.
Giles chief executive Chris Giles, who currently owns 20% of the business, could retain a stake. He is expected to remain at the helm of the broker.
Giles Insurance refused to comment, but a senior Giles source confirmed that the broker was looking to change private equity houses.
It is understood that a deal could be concluded this week, and could supersede Giles’ plans to float in 2009.
Gresham, the private equity house, which backed a £45m buy-out in 2006, currently owns a 41% stake in the business.
Aviva, parent company of Norwich Union, owns a 7.5% stake, which it acquired five months ago for £5.2m – at the time valuing Giles at £69m.
An acquisition price of £185m would be more than double the enterprise value last year and would value Aviva’s stake at £13.9m.
Giles is aiming to grow to £300m in annual premium income by 2009, principally through acquisitions.
The business is thought to currently control approximately £200m in annual premium.
The broker had been considering a flotation next year as a potential way to raise more capital. It is thought such a move is now unlikely in the short to medium term.
Last year the company raised an additional £50m in bank debt to fund its acquisition strategy.
In November it made its first Welsh purchase, Hedges and Rose and in October it acquired Crosbie & Jack, one of the largest independent brokers in Scotland, controlling £20m in gross written premiums. Giles Insurance was founded in 1967.
Charterhouse already owns 38% of the merged Saga and AA. A market source said that Charterhouse could look to exploit opportunities between Giles and AA/Saga.