Advent International among at least two names in the running for minority stake in consolidator
Towergate is in talks with Advent International and at least one other private equity firm about selling a minority stake in the consolidator.
As previously reported, Towergate has signed a preliminary agreement with a private equity house which, if successful, will hand the firm a minority stake in the business in the first quarter of this year.
Insurance Times can now reveal that at least one other private equity house is also competing for a deal.
Advent International is understood to be in the running. Chairman Peter Cullum has a close relationship with the business.
The deal will net Towergate hundreds of millions of pounds and is likely to take Cullum’s shareholding in Towergate from 65% to less than 50%. However, neither he nor chief executive Andy Homer will use the new investment to take money out of the company.
The cash will significantly boost the consolidator’s coffers as it looks to pay down debt, redeem preference shares and boost its acquisition funds before a flotation targeted for 2012-13.
The equity backing is designed to improve the terms of Towergate’s planned £665m bond issue, which will replace the company’s current outstanding debt, reduce the number of outstanding preference shares – thus reducing interest payments – and give the broker a £100m acquisition fund. It is expected that the private equity financing will trigger the bond issue.
Towergate had £626.6m in debt at the end of 2009 and made interest payments of £52.9m during the year. The improved capital position resulting from the bond issue will in turn make Towergate a more attractive prospect to investors in preparation for its flotation.
Meanwhile, Cullum has been awarded a CBE in the New Year’s Honours list, for services to business and charity. Cullum said: “I am very honoured and it is flattering, although I regard this accolade as testimony to the talented and dedicated people we have within the Towergate family.”