Towergate Underwriting Group will complete a £20m deal to buy Folgate Insurance by the end of October and aims to spend a further £40m on acquisitions.
The deal between Towergate and Folgate was ratified last Friday (September 28) at a meeting between the directors of Folgate and its German parent company Wüstenrot & Württembergische (W&W).
W&W said its strategy no longer included the ownership of Folgate.
Towergate will buy Folgate as a going concern, which Towergate chief executive Peter Cullum said gave his company a lead over other bidders.
Folgate, which had a gross written premium of £58m in 1999, is also believed to have had merger talks with Churchill and MMA.
Cullum said the acquisition was part of a “large-scale series of acquisitions” by Towergate.
He said Towergate, which has a gross written premium of more than £200m per year, planned to spend another £40m over the coming year on regional brokerages and was already in talks with several well known companies.
“The acquisition of the Folgate portfolio and, importantly, its infrastructure, provides a solid platform for our planned growth,” Cullum said.
“This transaction will enable Towergate to embark on the second phase of its journey as a virtual insurer.”
Cullum formed Towergate in 1997 and has bought 29 companies and created five start-ups since 1998.
Cullum said Towergate's gross written premiums would grow to more than £400m by the end of 2004.
Cullum said there were no redundancies planned and current Folgate chief executive Chris Garland would remain in charge of the insurer.
“We're comfortable with the existing management team and won't be putting anyone in there over them,” he said.
Cullum said he was particularly keen on Folgate's well established network of key brokers and its new commercial division.
Towergate specialises in scheme and affinity group business and already has underwriting partnerships with AXA, CGNU and Allianz Cornhill.
Towergate is expected to concentrate on Folgate's existing schemes with AA Insurance, the Civil Service Motoring Association, DBS Assured Services and Berry Birch & Noble.
Garland said the sale would “in no way resemble a traditional merger or acquisition now commonplace in the UK insurance industry”.
“Folgate management is genuinely excited about the prospect of completing the sale of the company with Towergate,” he said.
