Esure Shares Advance on Plan to Spin Off Unit

  • Demerger to take place in fourth quarter, backed by board
  • Canaccord says move will help boost Esure’s capital ratio

Esure Group Plc climbed to the highest since June 30 after the U.K. automotive insurer announced a plan to demerge its price-comparison website through a separate listing on the London Stock Exchange.

The decision followed a strategic review and is conditional on the approval of shareholders, the company said in a statement on Tuesday. The spinoff is expected to take place in the fourth quarter and has been recommended by Esure’s board.

“The demerger allows both business to thrive in their respective markets,” Esure Chief Executive Officer Stuart Vann said in a telephone interview. “Gocompare is one of the major players within the price-comparison sector; expansion opportunities beyond insurance are huge.”

The shares climbed as much as 3.2 percent. They were up 1.6 percent to 291.8 pence at 8:43 a.m. in London, extending the gains this year to 15 percent.

Esure earlier this year appointed former executive Matthew Crummack as CEO of the comparison website. The spinoff is expected to enhance Crummack’s effort to attract and retain technology-focused employees who are more likely to join a standalone digital business than an insurer, according to the statement.

Prior to the completion of the deal, will draw down on a new 75 million pound ($100 million) debt facility and pay Esure a cash dividend of about 63 million pounds to cover the fees associated with the transaction and help boost Esure’s solvency capital requirements. Costs arising from the demerger are anticipated to be about 19 million pounds.

“The details of the demerger suggest this is as much about capital support for an undercapitalized underwriter as it is a way to unlock unrecognized value,” Canaccord analyst Ben Cohen wrote in a report.

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