Broker Network Share Discussion Threads

[lomax99] 14/10/2007 12:12

Yes the Mail on Sunday suggests an offer will come in at somewhere between £80-£90M, with the current market cap on £79.7M (5.175 * 15.404M shares) that suggests a take-out price somewhere between £5.19 - £5.84, hardly any premium to yesterday's closing price and only just in line with analyst's general forecasts pre-bid.

Geovest's summary on Friday indicated £7.75, anything less than £7.00 a share would be really disappointing, hopefully Towergate will not be alone in their interest.......

[km1966] 14/10/2007 11:43

bigman - i hope they do not get them on the cheap because i was hoping that my modest BNH holding would pay for an extension to be build on my house. Another £3/4 per share would be perfect.

[bigman] 14/10/2007 10:46

mail on sunday says it is towergate, could be an interesting week ahead and interest spill over into jelf and CBG as consolodators similar to BNH, they in turn get consolidated after they have done all the hard work building and consolidating at the bottom end, then to get swallowed up by a bigger fish. lets see the colour of your money towergate as you are not getting this beauty on the cheap.

[sbbowie] 13/10/2007 06:50

Not much in the online version of the papers, the FT had this:

Broker Network , the insurance broker, rose 9.2 per cent to 517½p on news of a bid approach. Broker JM Finn said further consolidation in the sector was inevit-able and reiterated its "buy" rating and 570p target price.

[geovest] 12/10/2007 23:16

Some shares are better than cash!

[slapdash] 12/10/2007 22:01

well played guys... I sold too early... frustrating but going away for a few days and wanted to go into cash... pain in the ass... slapper

[km1966] 12/10/2007 21:31

£10 and they can have mine

[geovest] 12/10/2007 20:59

According to Insurance Age its Towergate and AXA that in the frame at the moment.

[bigman] 12/10/2007 14:14

I just added a couple thousand via my broker and could only buy a few hundred on the internet

[lomax99] 12/10/2007 13:59

Couldn't resist, just added another 914 shares - unfortunately had to pay £5.00 each.

[geovest] 12/10/2007 13:46

I've noticed that pattern many times with BNH. Price shoots up early, gets dropped for a few hours by MM's to try and shake a few sellers into thinking they should lock in profits before it drops more, then it moves up strongly again when there is no more sellers.

There is no or little short term traders in BNH and the price therefore moves slower, but I have no doubt that it will move up further over the next few days.

[bigman] 12/10/2007 13:26

interesting that the price has fallen from this morning, i am picking a few more up as there can be no down side in IMHO unless of couse the board sell it cheap and i just cant see thatas why would they!

[diogenesj] 12/10/2007 13:05

The newspapers usually find out pretty quickly. I expect we shall see some informed guesses in tomorrow's papers.

[geovest] 12/10/2007 12:28

Dan, no idea who but it may come out on the grapevine.
It will only appear on the takeoverpanel site after a formal offer when we will already know the identity.

[dan_dare] 12/10/2007 12:22

Might pay to keep an eye on the disclosure table on this site.

[dan_dare] 12/10/2007 12:11

Good post Geovest

I currently have 750 NAV price and as you rightly say this would increase with two bidders. Adding on all the dips has certainly paid off - only now hope a rejection will give us another as the chart shows us to be at the top of the longterm channel. Although anything can happen with such interest now.

Anyone any idea who the interested party is?

[geovest] 12/10/2007 12:00

Even though my mattress has been stuffed to capacity with BNH shares, I decided there is still some room in the pillow and bought some more this morning. Now, where can I find some more cash....?

[bigman] 12/10/2007 11:15

Thanks for that geovest, super post and ofcourse the big boys know that the insurance market is very soft at this time, ie cheap premiums and very competative and when the market turns as it will the £550m of premium income could easily be £1b and of course the commisions earned go up accordingly so without doing anymore work, profits, income and premiums could double making it a very cheap purchase at this time. of course it is a longer term play for the big boys but they know their market and that it will turn, plus they take long term views to secure their route to market. in short it is a no brainer for them. you just cant have enough insurance in your portfoloi IMHO

[lomax99] 12/10/2007 11:12

Geovest,

Useful analysis, thanks very much. £7.75 would be rather useful 59% uplift from the current price (£4.875), surprised that it is not trading higher than it currently is. The old phrase 'eggs and baskets' keeps springing to mind, if I can get past that I may well top-up!

[geovest] 12/10/2007 10:34

lomax, to do a valuation you will have to look at the two sides of the business seperately.

a) Retail Broking (TL and 20 other brokers owned outright)

This produce around £85m premium income.
Some of the well publicised recent acquisitions are:
Groupama buys Lark - Premium income £75m, paid £40m
Jelf buys Lampier - Premium income £35m paid £19.5m

If we apply these sort of valuations the broker business will be worth around £45m.

b) Network business:

Last year this produced pretax of £4.7m. If we asume a very conservative (by historical standards) growth of 30%, it should produce £6.1m this year or £4.3m after tax. At a fair 17.5 forward PE, it would value this side of the business at £75m

Total:
The combined total valuation therefore comes to £120m.
Altough you may argue that you need to deduct the net debt of around £12m, you will need to add a further control premium (part a already includes that but not part b) which should (at least) offset the net debt.

Therefore a valuation of around £120m or £7.75 may seem fair. I can however see this potentially being pushed much higher if AXA, Allianz, NU and Groupama start fighting for a company that effectively controls £550m of premium income.

I still maintain that this will be worth £10.00 per share within 3 years, but we may get there a lot sooner if the big boys start fighting over the bone.

One thing is for sure, they are now in play!

* Edited to correct that it was Groupama not AXA that bought Lark

[bigman] 12/10/2007 09:15

what a lovely start to the day, you just cant have enough insurance in your portfolio and whether they accept the offer or not we are flying, my insurance investments are the sector to be in.

[lomax99] 12/10/2007 08:53

What you say is correct, certainly for private companies, but surely the Director's do not hold enough stock (c 21.5%) to guarantee the outcome they may desire?

Does anybody have any idea of the potential take-out price? Or indeed the exit multiples that other insurers have supposedly been paying in the last year or so. If the brokers target, on still a mdoest prospective PE, was £5.74 then surely we are looking at £7.00 - £8.00 for control - is this a bit optimistic? Any views? (PS £10+ would be great, but I can't quite see it).

[ronmikeh] 12/10/2007 08:46

They can sell out to an institution, make themselves very rich, be incentivised by buy out and continue to run it for the next 10 years. Only losers are long term investors being sold short.As directors own nearly 25% and there are only two institutions (marlborough Fd. & JP Morgan Assetts owning about 10% they will have little impact on the decission).

[geovest] 12/10/2007 08:37

Only if you were planning to get out in the short term. You won't sell your business if you were planning to continue running it for the next 10 years.