LLOYD’S of London insurer Brit Insurance made a £226m all-share offer for smaller rival Chaucer yesterday, forcing private equity group Pamplona to reveal it has built a 7.34 per cent stake in the company.
Brit is offering the Chaucer board 0.23 new Brit shares for every Chaucer share. This is a nil-premium offer, meaning it risks being trumped by a higher bid.
Briti faces competition from private equity firm Pamplona Capital Management, which issued a statement to markets in the wake of the Brit offer claiming it now owns 40m Chaucer shares.
Pamplona, whose investment directors include former Resolution boss Paul Thompson, also said it has applied to City watchdog the Financial Services Authority for permission to build up a holding of over 10 per cent in the firm.
It also reiterated its plan to eventually up its Chaucer stake to 29.9 per cent. Chaucer said its shareholders should take no action while it studys Brit’s offer.
A spokesperson for Brit said the company was aware of the filing to the stock exchange by Pamplona, adding: “The statement Brit announced this morning still stands.”
At nearly a third below Chaucer’s book value, the Brit bid is unlikely to be entirely popular with its shareholders.
The bid was also undermined by a strong trading update from Chaucer yesterday, which suggested the shares could be more valuable.
Brit Insurance took on JPMorgan Cazenove (JPM Caz) as a joint broker, along with its existing broker Numis, on 20 January 2009.
Since then the investment-banking giant has been hard at work crunching the numbers on Chaucer.
Irish-born finance heavyweight Conor Hillery, JPM Caz’s corporate finance division managing director for EMEA, has been leading Brit’s search for buyout targets.
Educated at University College Dublin, Hillery qualified as an accountant at the Irish offices of “big four” accountancy giant KPMG before spending the last ten years in London – eight of which have been at JPM Caz.
Hillery is also head of the JPM Caz team that brokered and sponsored the recent rights issue by Lloyd’s of London group Catlin.
The keen golfer played a key role in the integration of JPMorgan and Cazenove in 2004.
Fighting for the best deal for Chaucer is Tom Booth, at longstanding house broker at Numis.
Meanwhile Pamplona’s move to capitalise on yesterday’s Chaucer announcement by upping its stake in the insurer was led by Stephen Howard at Keefe, Bruyette & Woods.