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Brit Insurance says Apollo sweetens approach

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Brit Insurance said Apollo Management had raised its takeover bid to 10.75 pounds a share, valuing it at about 852 million pounds ($1.32 billion) and improving the chances of a successful conclusion to a deal.

The head of the Lloyd’s of London insurer said the revised approach from Apollo was a step forward in the proceedings, after it rebuffed an improved takeover proposal of 10.50 pounds per share earlier this month. “On behalf of shareholders, we think it is a good basis on which we can start to have discussions,” Chief Executive Dane Douetil told Reuters.

Brit, which sponsors the England cricket team, said it had opened its books to the U.S. buyout firm, after reporting a first-half pretax profit which smashed market expectations on Wednesday and said the momentum would continue. Analysts said the sweetened approach from Apollo, although not formally recommended by Brit, indicates a deal is likely to go ahead. “We believe this is now the beginning of the end for Brit,” said Eamonn Flanagan at Shore Capital.

“The strong H1 results should provide reassurance to Apollo and we believe the probability of a formal bid now coming has increased,” said Christian Stobbs at KBC Peel Hunt, adding that he is likely to upgrade full-year forecasts. Brit, which moved to the Netherlands for tax purposes last year, said the latest approach includes a 30 pence dividend and due diligence is expected to take a number of weeks.

“If they (Apollo) do ever make an offer, at that time, we will consider the offer,” said Douetil. Shares in Brit were up 10.0 percent to 10.05 pounds at 0936 GMT, while the FTSE 250 was down 0.4 percent. Brit’s shares have climbed about 26 percent since it knocked back Apollo’s original 10 pounds per share cash approach on June 11 which valued the company at 770 million pounds. Analysts believed the company was holding out for an offer equivalent to its net asset value of about 11 pounds per share.

Lloyd’s of London insurers, which offer cover against large-scale risks such as natural disasters, are seen as potential takeover targets because cyclically low insurance prices have weighed heavily on their shares. However, analysts say a lack of well-funded trade buyers, and companies’ determination to hold out against opportunistic private equity bids, could mean few deals are completed.

Brit reported a pretax profit of 72.8 million pounds ($113 million) for the six months to end June, compared with 64.9 million pounds in the same period last year, driven by a strong underwriting performance. Analysts polled by the company had put pretax profit at 47.9 million pounds, with expectations ranging between 15 and 65 million.

Brit, which insures UK businesses and also operates in the Lloyd’s market, reported a combined ratio of 96.5 percent and investment return of 1.6 percent. Douetil added the group is “well down the path” in finding a successor to longstanding CFO Matthew Scales, who will step down this year.

London, July 28 2010 (Reuters)