CVC Capital Partners, the London-headquartered private equity house, has agreed terms for a 255 pence per share offer for UK-listed spread betting group IG Index.
The offer, announced today, values the business at £143m and is at a premium of 40.5 per cent to the closing mid-market price of 181.5 pence per IG Share on 17 January 2003, the last business day prior to the announcement by IG that major shareholder and founder Stuart Wheeler wished to dispose of his stake in the business.
CVC is backing a management team of Nat le Roux, chief executive of IG, Tim Howkins, finance director, Peter Hetherington, chief operating officer and Andrew MacKay, legal counsel. In total, management have agreed to take stakes totalling just under 20 per cent.
Financing for the transaction included debt facilities totalling £98m, of which £60m was underwritten by mezzanine specialist Intermediate Capital Group and £38m by Bank of Scotland Corporate Banking. Bank of Scotland has also taken a £5m equity stake.
The origins of IG date back to 1974 when the business was established by Wheeler to enable clients to bet on the price of gold at a time when exchange controls prevented UK residents from buying gold, except at a premium. IG Group’s activities have expanded significantly since its formation and its operations now allow clients to bet on or trade in a range of products from stock indices, shares and currencies to sporting events.
In its annual report for the year ended 31 May 2003, IG Group announced a 20 per cent increase in turnover to £39m (2002: £32.5m). Profit before tax increased to £15.2m from last year’s £13.3m. The company also reported cash of £35.5m.
“The market for spread betting continues to demonstrate considerable growth,” said Robert Lucas, who led the deal for CVC. “With the backing of CVC, the management team will be able to fully develop IG’s potential, and continue to build on their leading market share.”
CVC is investing from its most recent European fund which closed on £2.6bn in 2001. It is the firm’s third major transaction of the year following the £550m acquisition of Viterra Energy Services from E.ON AG and the £530m purchase of Danske Traelast Group, both announced in April. The firm is also involved in a consortium alongside Texas Pacific Group that is considering a bid for Debenhams, the UK department store chain.