Consolidator circulates information memorandum as it seeks means of refinancing.
Oval could become the first consolidator to be sold, as it emerged this week that the broking group’s senior management would sell the business for as much as £300m.
It is understood that chairman Phillip Hodson would sell as an alternative to refinancing. An information memorandum is being circulated around the market to encourage buyers. Oval is also believed to be talking to insurers about taking stakes in the business, though it declined to comment this week.
Giles Insurance Brokers, which has a £500m acquisition warchest, has been heavily tipped as a possible buyer. But Giles chief executive Chris Giles said he had not been in talks with the firm.
Private equity houses and other consolidators such as Towergate are also thought to be interested. But market sources suggested that a price tag of £300m was too expensive. One senior source said a sale price of up to £250m would be expected: “I think it will go for north of £200m. They’re looking for a huge, huge number.”
The news comes on the back of months of speculation about the consolidator’s finances.
Insurance Times reported last week that Allianz was in discussions with Oval to up its 10% stake in the business. It has also emerged that Oval had approached RSA and Zurich for investment, but had been turned down.
Private equity house Caledonia currently has a 35% stake in Oval. A source close to the investor admitted that it would eventually look to take money out of the business, saying: “Would they be happy sharing the board with other equity partners? Whatever happens, eventually they will want to take money off the table.”
Speculation that broker Perkins Slade was looking to pull out of a deal with Oval if the consolidator were to sell to Giles or Towergate has been dismissed by its management. A senior source at the business said it had taken the decision to give up its independence for reasons of succession. The source added that Oval’s acquisition of Perkins Slade should be completed by the end of the month.
The next stage of consolidation is likely to be a major acquisitor to be bought by a rival. Deloitte insurance partner Ian Clark said: “I expect to see two go in the next two years.”
Oval in numbers
Operating profit: 4.6m pounds, up 10%.
Earnings before interest, tax, depreciation and
amortisation: 11.7m pounds, up 19%
GWP controlled: approx. 400m pounds.
Brokerage: 85m pounds on an annualised basis.
Insurance accounts for 70% of Oval business.
Acquisition facility from banks increased by 15m pounds
to 68m pounds in November.
Has made 28 acquisitions.