4th Nov 2005 07:01
SVB Holdings PLC04 November 2005 NEWS RELEASE For immediate release Not for release, publication or distribution in whole or in part, in or into theUnited States, Canada, Australia, Japan or any other jurisdiction if to do sowould constitute a violation of the relevant laws of such jurisdiction. SVB Holdings PLC ("SVB") SVB sells its majority stake in Fusion SVB today announces the sale of its majority stake in Fusion Insurance ServicesLimited ("Fusion") to Broomco 3881 Limited ("Newco") at a value for the entireissued share capital of Fusion of £25 million. Newco is a newly formedmajority-owned subsidiary of Towergate Underwriting Limited ("Towergate")managed by the existing Fusion management team ("Fusion Management"). The sale of SVB's stake in Fusion will generate a cash inflow for SVB of £15million before transaction costs. No tax is expected to be payable on the sale.The net proceeds will be used as solvency capital in SVB's Lloyd's underwritingbusiness. Fusion was established in 2000 with a view to an eventual realisation event inlate 2005 or early 2006. The sale of Fusion represents the logical conclusion toSVB's investment in the business. It allows SVB to achieve a significant return,equivalent to 2.5x its original investment, within the life of the original 2000agreement. As at 31 December 2004, the audited gross assets of Fusion were £31.8 millionand its net assets were £11.3 million. In the year ended 31 December 2004,Fusion reported audited turnover of £17.1 million and profit before tax of £3.8million. The SVB 2006 business plan submitted to Lloyd's in June anticipatedFusion-generated income of £80 million net to Syndicate 2147. As a result of thesale of its stake in Fusion, SVB will write less income in the short term thananticipated, but expects to rebuild this income in 2006 and beyond by growth inits direct and reinsurance property units following the recent US windstorms,together with the steady growth of Novae, SVB's wholly-owned regional liabilitybusiness, and a developing relationship with Towergate. Commenting on the sale, Matthew Fosh, Chief Executive of SVB, said: "This is a good price for a business that had been designed for a sale over afive year time frame. We achieve a significant return, equivalent to 2.5x ourinvestment. The transaction rebalances the business and allows us to focus ourattention and capital on the core Lloyd's business and in continuing to developNovae." Information on Fusion Fusion was established as a Lloyd's service company targeting UK regionalmid-sized businesses and providing property and commercial combined insurancecover. Fusion's founders are Kevin Pallett, Geoff Crisp and Stuart Pettet.Fusion is based in London and has offices in Leeds, Glasgow, Birmingham,Bristol, St Albans and Manchester. Fusion has underwritten on a bindingauthority from SVB's wholly owned Syndicate 2147. Fusion accesses its targetmarkets through a panel of 258 regional brokers. SVB will be the sole underwriter, via the Fusion 2004 binding authority, ofFusion's business between completion and a date not later than 31 December 2005.Thereafter, Fusion's business will continue to be underwritten by A ratedcapacity providers, which may include SVB, under agreements arranged byTowergate. SVB will retain the in-force business after completion, which willcontinue to be serviced by Fusion. Fusion Management's initial stake in the business was 20%, with SVB owning theremaining 80%. Under the terms of a ratchet mechanism agreed at the time of itsformation, Fusion Management's stake could increase up to a maximum of 49% ifnet asset and other performance conditions were met. Fusion met the net assetcondition at 31 December 2004, and is also expected to meet it as at 31 December2005. Under these arrangements Fusion Management's interest on exit is 40%. Themanagement and senior employee shareholders of Fusion will receive an initialand contingent cash consideration, together with an equity interest in Newco,for their 40% stake in the business. - ENDS - Contacts: SVBMatthew Fosh 020 7903 7300 M: CommunicationsNick Miles 020 7153 1539 The Directors of SVB accept responsibility for the information contained in thisannouncement. To the best of the knowledge and belief of the Directors of SVB,who have taken all reasonable care to ensure that this is the case, suchinformation is in accordance with the facts and does not omit anything likely toaffect the import of such information. This announcement does not constitute anoffer or invitation to purchase or subscribe for any securities. Lexicon Partners Limited, which is authorised and regulated by the FinancialServices Authority Limited, is acting for SVB and is not acting for any otherperson other than SVB and will not be responsible to any other person other thanSVB for providing the protections afforded to its customers or for providingadvice to any other person. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Novae Group