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Brit investors discuss Apollo

SHARES in Brit Insurance rose a further 5.7 per cent to 930p yesterday as management held talks with investors over their rejection of a £785m offer from US group Apollo.

Although Brit Insurance’s largest shareholders – including Schroders, Third Avenue and Deutsche Bank – back the board’s decision to turn down the private equity player’s cash offer of £10 per share, some smaller institutions are irritated.

One well-known fund manager with a stake below five per cent told City A.M.: “I’m surprised they rebuffed it so rapidly to be honest, if the approach was at £10. The prospect of a 30 per cent premium [to the undisturbed share price] is not to be sniffed at in these markets.”

Brit Insurance chief executive Dane Douetil and chairman John Barton, advised by Lexicon Partners, are refusing to engage with Apollo while the offer is below market forecasts for net tangible assets (NTA) in 2010, around £11 per share. Apollo, advised by West Hill, believes real NTA is below £10 per share after the effects of a staff incentive scheme and Brit Insurance’s dividend are factored in.

Brit Insurance’s paper has soared 26 per cent since Apollo’s approach became public on Friday, leading one analyst to suggest the American buyout firm had “done management’s work for it” by unlocking value from the depressed shares.

Tom Dorner of Oriel Securities was doubtful a deal would be struck. Apollo’s move was an “opportunistic” swoop on Brit Insurance’s discount, Dorner said, while the board would not sell below NTA. He said: “It would be like saying the management believed someone else could run the company better than they can.”