THE BATTLE to buy Lloyd’s of London insurer Hardy Underwriting is hotting up, after a pair of new bidders entered the fray.
Montpelier Re and Mitsui Sumitomo are said to have expressed an interest in buying the firm and join a list of potential suitors that includes Lloyd’s rival Canopius, Bahrain based Arig and the American company Tower Group. Fellow Lloyd’s underwriter Beazley remains the only publicly declared bidder.
Hardy is undergoing a strategic review and is touting itself to potential buyers after a series of catastrophes hammered its bottom line.
It faces £10m-£25m in losses from last year’s floods in Thailand in addition to a £32m bill following earthquakes in Japan and New Zealand.
Eamonn Flanagan, an analyst at Shore Capital, said he would “be astonished if there isn’t a decent level of interest” and that the deal “is good enough to go”.
But potential buyers may hold back on making an offer until Hardy’s year end results are published on 1 March in order to assess the total cost of the Thai disaster.
“The underlying business that Hardy has is very good,” said Flanagan. “The non-catastrophe lines are working very well but the catastrophe lines have been thumped.”
Flanagan issued a buy recommendation on the basis that Hardy’s complete ownership of its own Lloyd’s business – with no need to rely on names – made it “incredibly attractive” to global reinsurers who want to minimise compliance procedures when entering new markets. “If you go through the Lloyd’s vehicles you can turn up in Outer Mongolia and you can write business quickly,” he said.
Mitsui said suggestions it was eyeing Hardy were “pure speculation”. Montpelier declined to comment.
Montpelier’s former chairman Tony Taylor is now a non-executive director at Hardy, which may affect potential takeover talks.
Shares in the firm yesterday closed up 0.9 per cent at 193.25p. Only thirteen months ago Hardy’s board turned down an takeover bid from Beazley after demanding a price “substantially in excess” of the 350p per share offer.
Lloyd’s of London insurers are considered vulnerable to takeovers after a string of disasters hit share prices and they struggle to raise funds to meet stricter capital requirements.
MEET THE ADVISERS
Crispin Wright is leading the Rothschild team advising Hardy, with assistance from Peel Hunt’s James Britton.
Wright joined the bank in 1998 from Deutsche Morgan Grenfell, where he helped with the flotation of the Halifax building society. Since then he has advised Wolverhampton & Dudley Breweries on avoiding a takeover from Pubmaster and in 2010 helped currency printer De La Rue face down a £900m bid from Obethur.
In addition to Hardy he advises airport operator BAA, ferry company P&O and Jardine Matheson, the biggest investor in Lloyd’s insurance broker JLT.
He studied history at Oxford University and sits on the FSA’s Listing Authority Advisory Committee.
James Britton, director of corporate finance at Peel Hunt, leads its Hardy team with help from Guy Wiehahn and Emma Riza. Britton joined the firm in 2003 to build its M&A and financial service financial services practice.
He has spent 25 years in corporate finance and was previously as a managing director at Deutsche Morgan Grenfell.