The Folgate Partnership has agreed the purchase of its first major broker and is in discussions with ten others, according to operations director designate Kenny Maciver.
Maciver said the fledgling underwriting agency has agreed to buy Leeds-based broker Smithson Mason Group. He said that this was the first in a long line of purchases which will take place over the next 18 months.
"We plan to build a network of seven or eight large hub brokers and then around each hub buy six or seven smaller commercial brokers - the spokes around the hub."
He added that Folgate is in discussions with a further four "hub" brokers and six "spoke" brokers.
"We are planning to buy 50 brokers in the next 18 months," he added. He said venture capital cash supplied by Royal Bank of Scotland would be used to fund the purchases.
Maciver denied rumours Folgate Partnerships was prepared to offer 35% over the going rate for "spoke" brokers.
Maciver said The Folgate Partnership was waiting for permission to start trading from the Financial Services Authority (FSA). This follows the purchase of insurer Folgate for £20m by the Towergate Underwriting Group last November from German parent company Wustenrot & Wurttembergische.
It is understood that the FSA has to approve plans for how Folgate's run-off will be handled before The Folgate Partnership can begin trading. Maciver said: "We are hoping the FSA will give us permission by the end of March."
Towergate chairman Peter Cullum will be chairman of The Folgate Partnership and Maciver will be operations director. It is understood that Andy Homer will be chief executive of the company.
It is also understood that the new venture has underwriting agencies from Norwich Union, Zurich, AXA and Allianz. Maciver refused to confirm the details, but added that the company was still in talks with Royal & SunAlliance.
Smithson Mason handles over £30m in premiums every year and is part of the Broker Alliance. Sources close to the deal said that under its terms, company owners Philip Battersby and Martin Hill will retain control of Smithson Mason's IFA business. The Smithson Mason Group had a turnover of £4.3m in 2000 with an operating profit of £198,000.
Battersby, Hill and a third director Robert Everleigh shared emoluments of £254,000 in the year to the end of 2000 (the last year of account), compared with £203,000 in 1999. Pension contributions for two of the directors totalled £100,000. SMG has 130 employees and offices in Leeds, Bradford, York and Altrincham.