The scandal-hit insurance outsourcer Quindell is hoping for a “new start” after announcing plans for a boardroom clear-out and a sell-off of almost three-quarters of the business.
The Australian law firm Slater & Gordon has agreed to pay £637m for Quindell’s legal division, following months of negotiations. The cash deal surpasses Quindell’s market value and will provide a chunky payout of up to £500m for shareholders.
Quindell is also in line for half of any winnings from the division’s 53,000 noise-induced hearing loss cases and management said it planned to return as much of this as possible to shareholders.
Shares in Quindell jumped 5 per cent to 145p on the news.
The sale will radically shrink Quindell, with the legal division making up 75 per cent of the business. The management is committed to offloading even more divisions as part of efforts to repair the business’s balance sheet and reputation. Cash from future sales will also be paid out to investors.
David Currie, the interim chairman, said the sale of the legal division would help give the troubled business a “break from the past”, following “a very difficult period with a lot of turbulence”.
Quindell initially focused on technology for the insurance industry but its controversial founder and former executive chairman Rob Terry rapidly expanded the business through acquisitions that took it into areas such as scaffolding and solar panelling. At its height, it was worth £2bn and Mr Terry claimed it was the largest listed law firm in the world.
But the company’s complex structure attracted scrutiny over its accounting policies and the attention of short sellers. Its shares collapsed by more than 80 per cent last year and its joint broker Canaccord Genuity quit. And last November, Mr Terry and the finance director Laurence Moorse were caught up in complex share deals in which they offloaded Quindell stock on the promise of buying it back in two years’ time. Both resigned their positions.
Quindell announced yesterday that a review of its books by PwC found accounts were “at the aggressive end of acceptable practice”, and said the provisions for noise-induced hearing loss cases were “not appropriate”.
But Mr Currie denied that this was a vindication of critics, saying: “We’ve been very upfront about the fact that the accounting policies need to change. But the vindication today is that someone has done nigh on two months of due diligence and come out with an offer at the level they have.”
He added: “We’re selling the business where doubts have been seeded. We haven’t done it as a way to move on – it’s come as a by-product. There is a break from the past.”
Several of Mr Terry’s key lieutenants are also leaving as part of the deal. Robert Fielding, who replaced Mr Terry as chief executive, will move to Slater & Gordon, while Mr Moorse will leave the board.
Three other directors are departing. Mr Currie said: “There is a need for some fresh blood.” He added that he would be “very surprised” if the business kept the name Quindell, which has become a byword for scandal in the City over the last year.
Mr Currie is handing over responsibility of the company to AO.com’s chairman Richard Rose, who replaces him as the non-executive chairman.Reuse content