Cox downplays takeover speculation
In the week that it released its best ever results, UK motor insurer Cox has attempted to downplay speculation over its mooted acquisition of smaller rival Highway.
As reported in last week’s Insider Week, Cox announced on 15 March that it was in talks to buy Highway, with the aim of creating the UK’s fifth largest insurer.
It said it was still undertaking due diligence and that a further statement would be made once the process was complete.
But the following Sunday (21 March, 2004) The Times newspaper ran a piece stating that Cox’s chairman Peter Owen was “negotiating a blinder” for the takeover, with an offer of one Cox share for every two Highway shares at about 48p per share. With Highway’s shares currently trading at around 37.5p the deal would garner about £20mn of synergies and be accretive to earnings.
Cox responded today (Monday 22 March, 2004) with a statement reiterating that due diligence was still underway and that the deal was yet to be formalised. It read: ”The Board of Cox has noted recent media speculation regarding the terms of a possible offer by Cox for Highway and the level of synergies that may be achievable by the enlarged Cox Group.
“Cox is continuing to conduct the detailed financial, legal and actuarial due diligence to which it referred in its announcement of 15 March 2004. Cox will not be in a position to assess the synergies that may accrue from a combination of Cox and Highway or to determine definitively the terms and timing of an offer, if any, to be made by Cox for Highway until this due diligence has been completed.”
The speculation comes after Cox’s announcement of its best ever results.
Operating profits before tax and amortisation increased from £52.6mn to £58mn, while earnings per share rose from 11.2p to 18.6p and underwriting profit increased 32.7 percent to £52.7mn.
Cox chairman Peter Owen commented: “We have laid firm foundations upon which to develop our future growth and profitability. We have a strong team and proven strategy which is delivering positive results and a track record in underwriting that is unparalleled. We believe that the underwriting climate remains favourable, particularly in our chosen markets where both volumes and premiums are showing encouraging signs of growth. I have every confidence that we will continue to build on our impressive performance going forward.”