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March 11, 2013 2:16 pm
The prospect of the entrepreneur Peter Wood securing a bumper valuation for Esure has strengthened after the motor and home insurer found indicative buyers for its initial public offering.
Investment banks handling the offer received enough orders from prospective institutional investors to float more than a third of the equity, giving the business a market capitalisation of at least £1bn, people with knowledge of the situation said.
They said the development on Monday, the first working day after Esure issued its prospectus on Friday, was a sign of strong demand and a good indication for the final price of the IPO.
It comes even though Mr Wood, founder and chairman, along with his senior managers have yet to leave the UK on a global investor roadshow, the people said.
The order books being filled relatively early in the process will give a boost to Mr Wood, who is set to net as much as £152m by selling down his 49 per cent stake to about a third.
Tosca Penta is selling more than half its shares, taking its interest down to 16 per cent and raising as much as £271m for the private equity vehicle’s investors.
Esure, known for television adverts that feature the late Michael Winner, is aiming to float between 35 per cent and 50 per cent of its equity, priced at between 240p and 310p a share.
This would put the company into the FTSE 250 with a market capitalisation of between £1bn and £1.3bn and make the IPO London’s biggest so far this year.
Although the orders are not necessarily binding they suggest Esure has overcome fund managers’ caution about the growth prospects of UK motor insurance, a price-driven and competitive market.
Esure is wooing income-hungry investors by paying dividends equivalent to 50 per cent of earnings, as well as potentially special dividends.
The company has told prospective investors the targeted valuation is justified given its growth prospects and set senior executive targets of lifting earnings by two-fifths within three years.
The group, whose annual pre-tax profit doubled to £116m in 2012, said it was well placed to deal with regulatory changes, such as a clampdown on bodily injury claims.
Esure also argues that its female-focused Sheilas’ Wheels brand should benefit from recently introduced rules preventing insurers from using gender to determine premiums.
It says its pricing will be less disrupted by the changes than its competitors.
Esure owns a half-share in gocompare.com, the price comparison website that is considering a sale. The prospectus disclosed the owners would consider offers of at least £275m for the equity of the business.
Esure declined to comment.
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