Giles Insurance close to confirming £5.1m bid for Aim-quoted CBG

GILES Insurance, the acquisitive Glasgow-based broker, is close to confirming its £5.1 million bid for Aim-quoted CBG in a move which will provide a springboard for expansion in the north-west of England.

A deal with CBG would give Giles a significant presence in the region, with major bases in Manchester and Blackpool to add to its existing offices in Wigan and Chester.

The move would also consolidate Giles' top ten position in the UK independent brokers' market and take staff numbers to more than 1,100.

While both Giles and CBG have stressed there is no certainty an offer will be made, it is understood that discussions are at an advanced stage.

Last week Giles said it was looking at a cash offer of 32p a share for Manchester-headquartered rival CBG Group which would value the business at 5.1m.

Although the potential offer price is less than the 39.5p high which shares in CBG hit last August, the company's market value has since been hit by disappointing trading figures.

The offer price would represent a 54.2 per cent premium to CBG's share price at the close on Tuesday when news of its approach was confirmed. It would also represent a 77 per cent rise on the year-low the shares hit in January and it is thought likely a number of CBG's major shareholders would be supportive at the level suggested.

News of the potential offer has also raised the prospect that Giles, majority-owned by private equity group Charterhouse, may look to use CBG's Aim listing itself. Giles had long been the speculation around a potential flotation before insurance entrepreneur Chris Giles, son of founder Michael, eventually sold to Charterhouse in a 185m deal in 2008.

CBG's largest investor is asset manager Octopus with a 17 per cent stake. Other significant investors include the offshore Polar Capital Global Insurance fund which acquired a 6.3 per stake just six weeks ago.

Other stakeholders include Stephen Darcy, the company's former director of insurance operations, who left the company last year.

CBG, which employs around 100 staff, floated in 2003. Pre-tax profits last year fell by 180,000 to 842,000 with revenues down 1.2m to 7.7m blamed on increased competition and the challenging economic climate.

The Giles group saw turnover of 69.9m in the year to the end of August 2010 with operating losses of 6.5m in the year compared to a profit of 8.4m the previous year due to costs of integrating acquisitions and interest charges.

At the time the results were filed in May the company said it was actively looking at a number of acquisition opportunities and believed it had sufficient funding in place to "continue to take a lead in consolidating the market".

Shares in CBG closed at 28.5p.