Acquisition of Argyll Insurance (Holdings) Limited ("Argyll")
02 April 2008
Jelf Group plc, an independent full-service brokerage that supports businesses and connected individuals, is pleased to announce that it has entered into agreements to acquire the entire issued share capital of Argyll Insurance (Holdings) Limited ("Argyll").
Highlights
- The Argyll Group comprises Argyll Insurance Services Ltd and Argyll Financial Services Ltd and operates from three locations in Worthing, Gillingham (Kent) and Herne Bay. This represents Jelf's first foray into the Kent/Sussex area and Argyll will act as a hub for further organic and acquisition-based growth in this area
- The acquisition of Argyll will be satisfied by an initial consideration of £9.94 million to be paid in cash and shares
- The acquisition will increase the gross written insurance premiums ("GWP") placed by the Group with insurers from approximately £175 million to approximately £196m (an increase of £21million or 12%). This deal strengthens Jelf's position as one of the leading, independent UK insurance brokers
- The range of services currently offered by Argyll is complementary to the Jelf proposition. Jelf will strengthen the core offering of general insurance and wealth management and will provide access to new services, namely employee benefits, healthcare and commercial finance
Alex Alway, group chief executive of Jelf said: "I am delighted to announce this acquisition. It is an important step forward for Jelf as it represents another extension of our geographical footprint into Kent / Sussex, and also represents another "hub for growth" around which we will consolidate small scale acquisitions. This is entirely in line with our "buy and build" strategy."
ENQUIRIES:
Jelf Group plc
Alex Alway, Group Chief Executive
Tel: 02454 272 799
Rose Clark, Director of Finance
01454 272853
Ian Soanes
Cenkos Securities plc
Tel: 020 7397 8900
Pelham PR
Polly Fergusson
Tel: 020 7743 6362
Damian Beeley
020 3178 2253
Introduction
Jelf is an established corporate intermediary with operations in the North-West and Southern England and South Wales offering a range of financial services to corporate clients principally in the areas of commercial and personal insurance, healthcare, employee benefits and wealth management.
The Board is pleased to announce the acquisition of Argyll, which was completed on 1 April 2008. Jelf has acquired the majority of the issued share capital of Argyll and entered into a put and call option agreement, to be exercised on or after 6 April 2008, to acquire the remaining issued shares.
Details of the Argyll Acquisition
On 1 April 2008, Jelf acquired 68.76 per cent. of the issued share capital of Argyll and entered into a put and call option agreement, to be exercised on or after 6 April 2008, to acquire the remaining 31.24 per cent. of the issued shares.
The acquisition of Argyll will enable Jelf to strengthen its strategic position in the South East by extending the scope of its operations into the counties of Kent and Sussex. This acquisition will act as a hub for the consolidation of future small-scale acquisitions in the Kent and Sussex area. Kevin Young will retain his position as chairman of Argyll.
Initial consideration of £6.26 million has been paid in cash and shares in respect of the purchase of the majority of the share capital of Argyll and a further initial consideration of £2.84 million in cash and shares is expected to be paid in respect of the remainder upon exercise of the put and call option. Jelf has been granted an option to acquire the remaining issued shares in Argyll under the option agreement and the vendors are entitled to call for their shares to be acquired if Jelf has not acquired them by the 14 April 2008. The shares which are subject to the option are to be acquired on the same terms as the majority of the shares were acquired. It is expected that Jelf will exercise its call option immediately after the 6 April 2008.
The balance of the initial consideration, estimated at £0.84 million, is subject to adjustment by reference to completion accounts, which will test the level of net assets at completion and the income streams of Argyll in the twelve months preceding the completion date, and will be paid in cash.
Deferred consideration is payable over the twenty-four month period following the acquisition of the majority stake, and has two elements. The first part relates to the maintenance of the existing turnover and may result in the payment of up to but not exceeding £2.56m in cash. Failure to achieve these targets may result in a reduction in the amount paid. An additional amount, estimated at £1.25m, is contingent upon targets being exceeded. This amount would be payable in cash and is not subject to a maximum limitation.
The vendors of Argyll are also incentivised to cross-sell Jelf services to new and existing Argyll clients in the period of 24 months following completion of the acquisition.
In the year ended 30th April 2007, Argyll reported profit before tax of £1.03 million (2006: £0.80 million) on turnover of £5.36 million (2006: £4.60 million) and as at 30th April 2007, Argyll had net assets of £2.55 million (2006: £1.89 million).
Outlook
Gross written premium ("GWP") in the insurance and healthcare sectors is a key factor in negotiating commission rates with insurers where scale is an important driver of profitability. Argyll takes Jelf's insurance GWP from approximately £175 million (following the recent acquisition of the Manson Insurance Group, Bob Gee & Co. Ltd, Carter & Co. Risk Management Limited and Bartlett, Davies Bicks Ltd) to approximately £196 million. This further strengthens Jelf's position as one of the UK's leading independent insurance brokers.
Jelf is actively pursuing a policy of growth via organic growth and targeted acquisition of profitable insurance and healthcare brokerages. The Board expects the current trend of consolidation to be maintained and plans to continue to capitalise on the opportunities this creates.