The undisclosed sale consideration for independent broker Ed is in the $90mn-$100mn range, The Insurance Insider can reveal.
Last week, Ed shareholders received details of the agreed takeover, showing a 30 cents per share valuation on around 275 million shares in issuance – pointing to takeout price of just over $80mn.
However, management incentives, spread across a group of around 50 senior staff, are understood to take the purchase price past the $90mn mark.
Shareholders were told that the deal will close at the end of January.
Ed, previously known as Cooper Gay, had a high-water mark valuation of 175 cents a share, and the sale will force majority private equity owner Lightyear Capital – which invested in 2012 – to crystallise a significant loss.
The valuation is believed to represent a little less than 1x revenue. The business, which has been a turnaround case, is believed to have been sold off a multiple of revenue, not Ebitda, with the business still not generating meaningful earnings in 2018.
BGC, which owns Besso, beat off competition from parties including private equity house Warburg Pincus to acquire Ed.
In 2011, ahead of the Lightyear Capital buy-in, Ed generated Ebitda of $69mn and had an enterprise value in the high hundreds of millions of dollars, with hundreds of millions of equity capital value.
However, the business subsequently ran into issues as it parted company with long-time CEO Toby Esser and subsequently struggled to service its debt.
After being appointed CEO in November 2015, Steve Hearn oversaw the accelerated sale of US wholesale arm Swett & Crawford to BB&T for $500mn. He used the funds to clear the broker’s debt and to invest to turnaround the remainder of the business, which was focused on the London market.
However, although the business has started to show revenue growth, heavy investment has thus far held back the firm’s numbers, with Ebitda margins still very low.
Lightyear held back on a sale through 2017 and much of 2018 as it waited for a surge in Ebitda, but ultimately decided to cut its losses by selling the business off a multiple of revenues.
Following the close of the deal, Hearn will become head of BGC’s insurance division, overseeing stablemate Besso – acquired by the financial services firm in 2017 – and Ed.
At that point, Andrew Draycott – currently global head of sales and retention – will succeed Hearn as CEO of Ed's London operations. Hearn will remain as group CEO for Ed.
Ed declined to comment. Representatives from BGC did not respond to a request for comment.