Apollo Bid for UK’s Brit Insurance Seen Viable at around $16.30 a Share

By | June 15, 2010

U.S. buyout firm Apollo will have to raise its offer for Brit Insurance by at least 10 percent to pull off its planned takeover of the Lloyd’s of London insurer, analysts said.

Five analysts polled by Reuters said Brit would not accept an offer below the company’s net asset value of about £11 [$16.31] per share, compared with the £10 [$14.82] per share indicative bid Apollo tabled last week [See IJ web site – https://www.insurancejournal.com/news/international/2010/06/11/110678.htm].

Brit on Friday rebuffed the approach that valued Brit at £770 million [$1.142 billion] and said it would not hold any more talks with the buyout house until it came forward with an improved bid.

Brit’s rejection of the offer had the unanimous support of its biggest shareholders, one source familiar with the situation said on Tuesday.

“I think Brit have been pretty clear that they won’t enter into a discussion until the offer is at year-end tangible book value,” said Execution Noble analyst Joy Ferneyhough. “Management need to be careful because I don’t see a large number of counter bidders lining up.”

Brit shares, which have surged 26 percent since Apollo’s bid emerged last week, were down 1.4 percent at 916.5 pence [$13.59] by 1440 GMT, still short of Apollo’s offer.

“I don’t think there are any rival bidders, and even if there are there is no reason to assume they see greater value than Apollo,” said one banker who covers insurance.

The stock has traded at a discount to its peers because of Brit’s focus on low-margin professional indemnity insurance, as well as perceived acquisition risk following the company’s abortive bid for rival Chaucer last year.

Depressed share prices have made Lloyd’s of London insurers potentially attractive to buyout firms or foreign rivals, but analysts think deals are unlikely due to sellers’ high price expectations and difficulty financing takeovers in current market conditions.

Apollo and Brit declined to comment.

(Additional reporting by Victoria Howley; Editing by Michael Shields)

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