GUY Hands’ Terra Firma buyout house confirmed it was in the bid race for Lloyd’s insurer Chaucer yesterday following feverish speculation over the potential bidders.
Sources familiar with the situation told City A.M. that at least one further bidder is also in talks with the insurance company.
A US trade buyer is reportedly in takeover talks, while US private equity firms are also in discussions over making a bid, the sources said.
In a statement, Terra Firma said it “notes the recent speculation concerning a possible offer for Chaucer and confirms that it is currently considering making an offer for the entire issued and to be issued share capital of Chaucer.”
Chaucer, which has a market capitalisation of about £300m, has bounced back from a tough recession that saw it lose £72m of assets in the financial crisis and resort to a £75m rescue rights issue in 2009.
It is now considered a well-managed firm and has been a sales target for two years, with names such as Brit Insurance, Amlin and Novae all linked to merger talks.
Private equity firm Pamplona Capital owns 9.9 per cent, but also has an interest over a further six per cent stake previously owned by US hedge fund Och Ziff. However, the Financial Services Authority has not allowed Pamplona, which is financed by Russia’s Alfa Bank, to raise its stake in Chaucer above ten per cent.
Private equity firms have a growing interest in insurers.
TIMELINE | GUY HANDS’ PREVIOUS INVESTMENTS
William Hill: bought in 1997 for £700m
Bought by Nomura when Hands ran its private equity arm. Hands tried to float it in 1999 but abandoned the plan after a lack of interest. Sold to CVC Partners and Cinven for £825m for negligible return.
Thresher: bought in 2000 for £225m
Bought by Hands in his Nomura days, the off-licence chain was sold to a private equity consortium in June 2007. Hands made an undisclosed sum said to be a small profit on the buy price.
Le Meridien: bought in 2001 for £1.9bn
The hotel chain was bought in a highly-leveraged deal just before the slump in travel post-9/11. In 2003, creditor banks took control of it and restructured and re-capitalised it. Finance providers were paid back by 2005 and it was sold to a trade buyer.
Odeon & UCI: bought in 2004 for £582m
Hands merged two cinema firms to create Europe’s largest chain. The company is now valued at about £1bn. Private equity firms reported to have bid for it last year but Hands said no sale process was under way.
EMI: bought in 2007 for £4.2bn
Bought at the height of the buyout boom with £2.6bn of debt from Citigroup. Citi took control of it this year after its debt reached an unsustainable £3.4bn and will sell it. Terra Firma investors lost £1.75bn.