PE firms head for Heath Lambert exit

US insurance group Marsh has made an approach to buy its UK rival from a consortium of Candover, Advent and Phoenix in a deal that could value the business at more than £350m.

A group of three private equity firms look set to cash in their investment in Heath Lambert (HLF) after it emerged that US insurance broker Marsh was planning to make a bid for the UK insurance firm.

Heath Lambert has been the subject of a number of recent approaches, the most recent of which emerged on Tuesday, when it was reported that the US insurance giant was planning to make a £350m offer for the business.

Candover, Phoenix Equity Partners and Advent co-led the E148m public to private buyout of the then-named C E Heath in 1997. In December 1999, the business was merged with Lambert Fenchurch Group, itself a former Candover-backed buyout.

At the time of the merger, Candover said it planned to achieve an exit either via a trade sale or flotation, the latter of which was shelved last July due to difficulties in the IPO market. The listing would have valued the business at between £406m and £469m.

According to the Financial Times, the three private equity firms, which collectively control a two-thirds stake in the business, plan to push ahead with flotation plans if a satisfactory valuation of the business is not met in a trade sale. 

Heath Lambert is the seventh largest insurance and reinsurance broker in the world, with 4000 staff in over 80 offices worldwide. The company’s head office is in London. The group made operating profits of £49m on turnover of £279m in the year to March 2002, the most recent period for which figures are available. For the year to 31 March 2001, the company reported turnover of £250.8m and pre-tax profits of £37.4m.

The insurance sector has been attracting increased interest from the private equity community. Both Candover and Phoenix have been recent investors in the UK insurance and re-insurance market, which has seen rapid a rapid growth in premium rates since the September 11 terrorist attacks. Last May, the two firms joined CSFB Private Equity and 3i among others to back the launch of Wellington Re, a London-based property and casualty re-insurance specialist.