Shares in insurance Group Esure (LSE: ESUR) fell 1.7% in early trading this morning after it announced its plans to acquire the outstanding 50% of Gocompare.com Holdings Limited.
Esure has conditionally agreed to purchase the remaining stake of the business for £95m, which will see the Group gain full ownership of one of the UK’s leading financial services brands.
Gocompare.com, the online car and home insurance comparison website best known for its controversial adverts following opera-singing salesman Gio Compario, was the first comparison site to focus on features of insurance products rather than just comparing prices.
They have built a strong brand through heavy media spend and also won a “most irritating advertisement” award. You’d be hard-pressed to find anyone in England not familiar with the over-exuberant tenor.
Management at Esure sites opportunities to “drive expansion and diversification over the medium to long-term” as motivation to complete a deal. In the short-term, the group should see an increase in earnings on a cash basis after one year. The acquisition will be funded by the issuance of up to £125m of subordinated notes.
Gocompare reported revenue of £110m and profit before tax of £25m last year. Based on these metrics, the acquisition values the company at 7.6x earnings. Chief Executive Officer Stuart Vann said there were “significant opportunities for Gocompare to grow revenues and profitability over the medium to long-term.”
The acquisition seems conservatively priced compared to the markets, and this could be good business if Gocompare truly has room to grow.
