U.K.’s Cox Insurance Subject of Takeover Rumors

Rumors continue to swirl around the U.K.’s Cox Insurance Holdings Plc. concerning possible takeover bids.

The company, a leading player in Britain’s automobile insurance market, issued a statement over the weekend indicating that it had “received approaches” from several sources offering a substantial premium for its shares.

While Cox indicated it was in “preliminary discussions,” company officials denied that any formal offer had been made.

Speculation centers on the likelihood of a bid orchestrated by Cox’ former CEO Neil Utley, who left the company less than half a year ago. According to news reports (Reuters, The Financial Times and others), he has received the backing of U.K. banking group Lloyds TSB’s private equity group and Englefield Capital, a U.K.-based venture capital firm.

Cox reported underlying operating profits of £29.4 million ($54.4 million) for the first six months of 2004, compared to £28.9 million ($53.5 million) for the same period of 2003. The pre-tax profit figure, however, was lower than 2003, due to write-offs and costs. However Cox said its “disciplined approach” to retail underwriting “has enabled us to grow both profits and business volumes and has resulted in an excellent first-half performance, with underlying operating profit increasing by 42 percent to £30.6 million [$56.6 million] (2003 was £21.5 million) [$39.8 million].”

The news reports estimate that a successful bidder would have to offer a premium of approximately 100 pence ($1.85) per share, which would value Cox at around £313 million ($579 million). The company’s shares, which have gone up more than 30 percent since the rumors began, are currently trading at around 85 pence ($1.57) per share.

Any discussions, however, are still at an early stage. Ultimately a takeover would have to be approved by Cox’ largest shareholders – Warburg Pincus with 23 percent, the Palamon rivate capital group with 6 percent and the Fidelity Fund management group with around 10 percent.