Esure flotation to value insurer at £1.15 billion

Peter Woods and Peter Graham. Picture: SNS

Peter Woods and Peter Graham. Picture: SNS

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ESURE chairman Peter Wood is expected to pick up more than £175 million when his insurance group makes its stock market debut later this month.

The firm set a price range of between 240p and 310p for its initial public offering (IPO), in which it plans to float up to half its shares.

Based on the mid-point of the indicative price range, the firm would have a market valuation of about £1.15 billion, making it eligible for inclusion in the FTSE 250.

It is expected that Wood, who founded the group 13 years ago, will pick up in excess of £175m from the sale of part of his holding.

The amount that he and his fellow shareholders sell will depend on the final pricing, but the total stake floated will be between 35 and 50 per cent of the company, and an over-allotment option could see the offer size increased by 15 per cent if demand is strong.

Along with raising about £50m to clear the group’s debt, the IPO could net Wood – along with members of Esure’s management team and private equity firm Tosca Penta – more than £430m between them.

The insurance tycoon said final pricing for the IPO, along with conditional dealing in the shares, is expected “on or around 22 March”, with unconditional trading kicking off the following week.

He added: “We have worked hard for many years to make Esure a business that can compete at the highest level with confidence.

“Today is a milestone reached through the enormous hard work by the Esure board, executive team and staff. We live and breathe insurance at Esure and look forward to bringing that knowledge, commitment and focus to bear as a premium listed company.”

Wood founded Esure in 2000 as a joint venture with Halifax, the former building society that merged with Bank of Scotland to create HBOS the following year. He gained control in 2010 in a deal that valued the business at about £260m, after teaming up with fellow managers and Tosca Penta to buy out the 70 per cent stake that had passed to Lloyds Banking Group through its rescue of HBOS.

After years of subdued activity, London has seen a resurgence in companies seeking to float this year. Estate agent Countrywide and cable products maker HellermannTyton are also in the process of listing. Confidence has also been lifted by the successful listing of housebuilder Crest Nicholson, which floated at 220p on 13 February – valuing it at £553m – and is now trading above 280p.

Wood, who will remain Esure’s largest shareholder following its IPO, also founded Direct Line – the UK’s largest car insurer – in 1985. Direct Line was spun out from Royal Bank of Scotland in October when the taxpayer-backed bank floated off 35 per cent of the business, valuing it at about £2.6bn.

Surrey-based Esure was made famous by the late Michael Winner’s “calm down, dear” television ads. It also owns the Sheilas’ Wheels business, which is targeted at women drivers, and half of comparison website Go Compare.

The group employs more than 800 people at its main customer-facing operations base in Glasgow. It had 1.25 million in-force motor policies and 500,000 home policies at the end of 2012, helping pre-tax profits more than double to £115.5m last year.

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