Goldman Poised To Win Battle For Hastings
An arm of Goldman Sachs, the Wall Street banking giant, is in advanced talks about taking control of a major stake in Hastings, one of Britain's biggest car insurance providers.
Sky News has learnt that one of Goldman's private equity funds has entered exclusive negotiations in recent days about buying a minority shareholding in the Sussex-based insurer.
People close to the discussions said that the US bank's GS Capital Partners operation was likely to invest around £150m for the stake.
Hastings' board is also finalising plans to raise more than £400m through a new bond that will enable the company's shareholders to realise part of their investments.
Doing so will realise a multimillion pound windfall for Neil Utley, Hastings' chairman, who owns a substantial stake in the business, although he is understood to be planning to retain part of his shareholding after the deal is completed.
Goldman's private equity arm, which in the past has owned stakes in companies including Burger King, the fast food chain, is understood to have been granted an exclusivity period lasting several weeks.
Its desire to secure a deal valuing Hastings at about £600m is interesting because it comes at a time when many of the world's biggest banks are retrenching from principal investment activities because of increasingly onerous capital requirements.
Goldman itself is attempting to offload Rothesay Life, a pensions buyout firm it set up several years ago, because of the new capital rules.
Sky News revealed Hastings' plans to sell a minority stake earlier this year, since when the company's advisers have held talks with a large number of private equity firms, including Advent International, BC Partners and Bridgepoint.
Hastings is focused expansion strategy following an acceleration in earnings before interest, tax, depreciation and amortisation (EBITDA) to roughly £70m last year.
The company has around one million customers, and Gary Hoffman, who joined 12 months ago as group chief executive, has stated a target of trebling that number by 2020.
Mr Hoffman led the turnaround of Northern Rock during its period in Government ownership following the run on the mortgage lender in the autumn of 2007 which heralded the start of Britain's banking crisis.
He then spent two years as chief executive of NBNK Investments, a vehicle set up to acquire retail banking assets, but which was rebuffed in favour of the Co-operative Group in the contest to buy 632 branches from Lloyds Banking Group. That deal collapsed amid the capital crisis at the Co-Op earlier this year.
Based in Bexhill, East Sussex, Hastings employs more than 1400 people, over 80pc of whom are understood to be shareholders in the company. It is chaired by Neil Utley, the entrepreneur who led a management buyout several years ago.
Insiders cautioned, however, that no decision had been reached about any new investor being brought in and that Hastings' board could decide against a sale.
Hastings' valuation from a deal has been buoyed by the successful recent flotation on the London Stock Exchange of Direct Line Group, although Esure has seen its shares slide since listing.
Mr Hoffman's arrival last year triggered suggestions that Hastings would also look to go public, but the company has no plans to do so. Acquired by Insurance Australia Group in 2006, Hastings changed hands again in 2009 when it was subject to Mr Utley's management buyout.
Evercore and Peel Hunt have been advising the company on the talks about a stake sale, while Credit Suisse and JP Morgan have been overseeing the bond issue.
In a statement earlier this year, a Hastings spokeswoman said: "Hastings is a fast growing, successful general insurance business. We have exciting plans to continue with this growth.
"As part of their next phase of development the existing shareholders are exploring the possibility of introducing new private investors to share in the further growth of the business, and allowing the management team to focus on delivering its plan. However, as they are confident about the future success of the business, Neil Utley and the other shareholders will retain a significant shareholding.
"There is no certainty that a transaction will follow and the existing shareholders continue to keep all options open. Hastings is a privately owned company and, under this plan, would remain so."