Cox shares soar as suitors gear up for takeover offer

Shares of Cox Insurance soared almost 30 per cent yesterday after the Lloyd's of London motor insurer confirmed it is in early talks with more than one party that could lead to a takeover. Its shares rose 18.5p to 83.5p, valuing the company at £262m.

Shares of Cox Insurance soared almost 30 per cent yesterday after the Lloyd's of London motor insurer confirmed it is in early talks with more than one party that could lead to a takeover. Its shares rose 18.5p to 83.5p, valuing the company at £262m.

It is thought that Cox has been approached by a group led by Neil Utley, its former chief executive who was ousted in June. Speculation has centred on a possible offer by Mr Utley of a sizeable premium of about 100p a share, which would value Cox at £313m. He is understood to have financial backing from the venture capital firm Englefield Capital and the private-equity arm of Lloyds TSB.

A number of Cox's shareholders have become disillusioned with the company and were disappointed with the chairman's decision to replace Mr Utley with Andrew Fisher, analysts said. The company's first-half profits fell by half to £13.7m. Geoff Miller, at Bridgewell, said: "It wouldn't surprise me if Neil Utley would like to take the business private to build the company. But it also wouldn't surprise me if the management didn't put together a bid [to take the company private]". He said there was little appetite from equity investors for the intermediate insurance market, so Cox might have to look for alternative sources of funding.

Insurance products are increasingly sold over the internet or telephone and less through insurance brokers. But there is evidence that the situation is stabilising, with the intermediate insurance sector focusing on more specialist products.

Hastings Insurance Services, a privately owned car insurance underwriter and broker, said in August that it would consider a bid for all or part of Cox. In April, Cox broke off merger talks with the car insurer Highway Insurance.

Nicholas Johnson, at Numis, was sceptical about the takeover talks, saying that price could be a stumbling block. He said: "We do not see [Cox] as willing sellers at this stage. The CEO has embarked on a decisive strategy of building the group's broking and underwriting business by acquisition, and it is suggested by the company that it enjoys the full support of its largest shareholder Warburg Pincus." Pincus has a 23 per cent stake.