Benfield stirs up tranquil trusts

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The Independent Online
The normally tranquil world of Lloyd's investment trusts was shattered yesterday when Benfield & Rea (Brit), an investment trust chaired by Matthew Harding, the millionaire backer of Chelsea football club, jumped uninvited into the cosy merger recently agreed between two of the quoted corporate players in the insurance market.

Brit announced an pounds 80m counter-offer for HCG Lloyd's Investment Trust, which last month agreed a merger with the CLM Insurance Fund to create the second-biggest "spread" investment fund in the market. The Brit offer is being backed by shareholders holding 27.9 per cent of HCG's shares.

The announcement of the offer to swap one share in HCG for 1.0256 in Brit boosted the prices of all three groups yesterday. Brit shares added 2p to 119p, valuing HCG at 122p, which itself put on 6p to close at 118p, just above the 117p-a-share cash alternative. CLM rose 2p to 116p, putting a value of 110p a share on HCG under the terms of its 95 for 100 share offer.

Nicholas Wells, a director of Rea Brothers, which advises and manages the trust, said Brit had moved because it had become clear that shareholders were dissatisfied with the terms of the CLM merger. But the trust, launched last November to exploit valuation anomalies among Lloyd's corporate vehicles, had also been intending to become directly involved in the market, he said, and taking over HCG was a perfect way of fulfilling that strategy.

Brit has signed a letter of intent to acquire a minority stake in Wren, a Lloyd's managing and members' agency, in order to start underwriting in the 1997 year of account.

CLM remained unmoved by the Brit move. Michael Wade, chief executive, said they had noted the offer "and as far as we are concerned, our offer still stands to shareholders and we believe it offers good value". It is thought CLM may attack the bid on the grounds that the consideration for Wren, rumoured to be anywhere between pounds 20m and pounds 25m is not disclosed.

Analysts said the group may struggle to convince shareholders of the continuing merits of the original merger. For a start, Brit itself already directly owns 11.5 per cent of HCG and, with the holding of others of its own shareholders, principally Equitable Life, deemed to be acting in concert, controls a total of 27.9 per cent of its target. Holders of an additional 40 per cent or so have also committed themselves to taking up the paper offer if a higher one does not materialise.