Penta Capital reaps 3.3x on esure IPO(2)

The £1.2bn flotation of the UK’s fifth largest motor insurer has resulted in a big win for the UK deal-by-deal specialist – and more than doubled the money of co-owner Electra Partners.

Esure, a motor insurer backed by UK groups Penta Capital and Electra Partners, has completed its IPO on the London stock exchange. Shares in the group were priced at 290p, the top end of the range indicated prior to the flotation, valuing the company at £1.2 billion (€1.41 billion, $1.83 billion). 

Together with earlier returns of capital, this will generate a return of more than 3.3x for Penta. The firm sold £305 million worth of shares through the IPO and retains an 11.6 percent stake in the company, currently worth £140 million. It has the option to sell additional shares worth £90 million, which if fully exercised would reduce its stake to 4.1 percent. 

Esure was established in 2000 by Peter Wood, the founder of UK insurer Direct Line, initially with the backing of banking group Halifax and latterly Lloyds Banking Group. Based in Surrey, it primarily focuses on car and home direct insurance, sold to its customers via internet or telephone, and employs 1,500 staff. It has more than 1.6 million policyholders and generated pre-tax profits of £115.5 million last year. 

This is a great endorsement of Penta Capital’s model of sourcing high quality off-market investments and funding them on a deal-by-deal basis

Charles Schrager

Penta and Electra backed the management buyout of the company from Lloyds in 2010, via a £190 million single-deal fund managed by Penta. Electra invested £30 million for a minority holding, while Penta acquired a controlling stake in the business. 

“We are delighted to have backed Peter Wood and his team at esure on the most recent phase of their journey from a start-up in 2000 to a FT250 company in 2013,” said David Calder, a partner at Penta, in a statement.

“This is a great endorsement of Penta Capital’s model of sourcing high quality off-market investments and funding them on a deal-by-deal basis from our growing base of direct co-investors. We believe this will increasingly be the model of choice for private equity investors,” added Charles Schrager, another Penta partner. 

The IPO will also deliver £51.5 million in cash proceeds to London-listed Electra, on top of the £15.3 million already received. The firm retains 6.19 million shares in the company, valued at £17.9 million – resulting in an uplift of 33p on its 31st December 2012 NAV per share. 

Including income, the investment has generated a gross return of 3x for Electra. 

Esure adds to the recent spate of exits sealed by the firm, which concluded seven trade and secondary sales in the 12 months to September 2012. 

It is also the second exit in 12 months for Penta. The firm completed the recapitalisation of telecoms company Wireless Infrastructure Group last year, generating a 2.4x return on investment. The Glasgow-based firm, which has £200 million of assets under management, has eight remaining companies in its portfolio.