Phoenix talks with CVC collapse
Saturday 11 February 2012
Takeover talks between the insurance company Phoenix and the private equity house CVC that have been rumbling on since November collapsed yesterday.
The two sides were unable to agree on a price, and analysts say that no new suitors for the insurer are likely to rise.
Phoenix is lumbered with debts of £2.7bn, an amount in keeping with its occasional description as a “zombie” firm – it does not write new policies, instead taking a slice from the value of managing old ones sold by a bunch of now-departed insurers such as London Life.
Clive Bannister, Phoenix’s chief executive, said: “Whilst the board is obliged to consider credible approaches, the terms proposed by CVC did not reflect our view of the full value of Phoenix and its stable, long-term cash flows.
“As a result, we have mutually decided to terminate these discussions.”
Phoenix, formerly known as Pearl, has been hampered by a heavy debt burden taken on to finance the £5bn acquisition in 2007 of a portfolio of closed life funds which was put together by Clive Cowdery, the founder of the insurer Resolution.
The Investec analyst Kevin Ryan said that this had proved to be a major stumbling block in any takeover of Phoenix, and that it was unlikely any other bidders would now emerge.
“The challenge with Phoenix is the company’s capital structure and all that debt. It always looked as if a deal would be hard to pull off,” he said.
Phoenix shares fell 8.5p to 561p, leaving it valued at £979m.
Phoenix lost its finance director, Jonathan Yates, in December. He is taking up a new role as chief executive of Guardian Financial Services this month.
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