Direct Line founder to mull over higher bid for Cox
Peter Wood, the man who revolutionised the insurance market when he set up Direct Line, is today mulling whether to increase a takeover offer for Cox Insurance.
Mr Wood last week tabled an informal approach to pay £200m to take the company private, which was rejected by Cox's board on Friday. It is understood that the offer took the form of management buy-out which would include Neil Utley, the chief executive of Cox's retail business and a friend of Mr Wood.
Cox is set to issue a statement to the Stock Exchange this morning. Mr Wood, who is currently in the United States, is expected to reveal his intentions later in the day.
Cox is a Lloyd's of London insurer and was hit by losses from last year's World Trade Centre tragedy. Since then it has ring-fenced its commercial business, raised £73m in a rights issue and reinvented itself as a retail insurer.
It expanded its motor insurance operations through increased market share and the acquisition of Crowe Group's motor insurance syndicate at the end of last year. It is now the eighth largest motor insurer in the UK and the country's leading motorcycle insurer.
But its share price has suffered alongside its peers, closing last week at 61.5p compared with a recent peak of 140p in January.
Its current share price values the company at £189m and City sources said it was likely that shareholders would look for a greater premium than would be offered under Mr Wood's £200m bid. It was worth £612m four years ago.
Cox's shares are likely to rise on the back of news of the informal offer, which would put more pressure on Mr Wood and his backers to raise their price.
Mr Wood's approach is believed to be backed by the banking group HBOS, with which he has set up Esure, a telephone and online insurance venture. Esure took a 1.3 per cent stake in the business for £1.65m although it pointed out that the approach to Cox was made by Mr Wood personally rather than through Esure.
Mr Wood is thought to have made about £80m from building up and then disposing of businesses. He sold Direct Line to Royal Bank of Scotland Group and then set up another insurance venture called Privilege, which he sold after a year.
Cox would make a commercial fit with Esure and give the joint operation a critical mass within the industry. However, if it was taken over it would no longer need to operate under the umbrella of Lloyd's of London.
Cox has a million customers and is also one of the industry's best-managed operators, paying an average of only £89 of claims for every £100 of premiums that it writes.
A spokesman for Cox refused to comment. Mr Wood was not contactable.
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