Angerstein, an investment company with net assets of pounds 65m, is offering five shares and a warrant for five shares in Delian, a rival with assets of pounds 48m. Both are essentially investment trusts, investing in a range of blue chip companies, and using the assets as collateral to back insurance underwriting.
The introduction of corporate capital into Lloyd's is part of its evolution from a market supported by individual names with unlimited liability to one which is increasingly backed by institutional cash with limited liability. The move has coincided with an upturn in rates, and so the fortunes of the market, as the disastrous underwriting years of 1991 and 1992 work their way out of the system, which is reported three years in arrears. Both 1993 and 1994, which will be reported on in 1996 and 1997 are expected to have been profitable.
Against that background, Angerstein and Delian are merging in order to spread overheads over a larger vehicle and, more importantly, to acquire greater clout within the market so that their funds are put into more profitable syndicates. That matters because the 168 syndicates currently operating at Lloyd's - of which Angerstein and Delian invest in 85 - are expected to contract to 140 next year.
The two companies, who will form the second biggest Lloyd's investment trust, believe their combined overheads will fall by about pounds 650,000 a year from about pounds 2m currently.
Partly that will be achieved by sharing a Lloyd's adviser, SBIC, in which Angerstein holds a 25 per cent stake. Delian will also fall into line with Angerstein's policy of investing its funds in a passively managed FTSE-100 tracking investment fund to save costs.
Angerstein also announced net revenue after tax for the year to May of pounds 2.12m, earnings per share of 3.144p and a dividend for the year of 3.05p.