esure share price down, to purchase Gocompare

Insurer esure Group PLC, has agreed to acquire the remaining 50%, which it doesnt already own, of Gocompare.com Holdings Ltd, a website for comparing prices of different financial services.

“This is a great opportunity for the esure Group to acquire the remaining share of an important and innovative player in the price comparison market at an attractive price,“ said esures CEO Stuart Vann.

The UK insurer said it valued the deal at £95 million, which represents 50% of Gocompares earnings before interest, tax, depreciation and amortization in 2013, which puts the total value of “one of the UKs leading financial services brands” at £190 million.

Gocompare enables customers to compare the price of different insurances, loans, mortgages and utility contracts. Britains esure, which is operating mainly with home and motor insurances, said there are “significant opportunities” for the websites growth.

However, there are already a number of similar sites, including Moneysavingexpert.com, Comparethemarket.com, Confused.com and Google Compare, which was recently launched by the tech giant.

The competition in the market is severe and due to it, last month rival insurer Admiral said its Confused.com website would report decreased profit for the second half of the year. Meanwhile the biggest UK comparison website, Moneysupermarket, said its quarterly revenue grew 18% boosted by an increased interest in comparing costs of motor insurances as premiums edged up.

Gocompare was created in 2006 by its CEO Hayley Parsons, one year later esure purchased an option for £2.7 million to acquire 50% of the website. In 2010 the option was exercised. Gocompare reported 2013 full-year pre-tax profit of £25 million and generated £25 million of net operating cash inflows, at the end of the year the websites gross assets stood at £50 million.

Gocompare will continue to operate as a “strictly independent” business, Mr Vann said. Headquarters of the website would not be changed and would remain in Newport, Wales. However, upon completion of the deal CEO Hayley Parsons will leave the company and be replaced by esures deputy chief executive Jon Morrell. Ms. Parsons will receive £43.7 million if the deal gets approved by Competition and Markets Authority.

The acquisition will be funded by the issuance of £125 million of subordinated notes, with Deutsche Bank AG appointed as a sole underwriter.

esure Group PLC gained 2.58% on Friday and closed at GBX 214.30 in London. On Monday the stock lost 1.54% to trade at GBX 211.00 at 12:14 GMT, marking a one-year decrease of 12.66%. The company is valued at £893.29 million. According to the Financial Times, the 9 analysts offering 12-month price targets for esure Group PLC have a median target of GBX 261.00, with a high estimate of GBX 320.00 and a low estimate of GBX 220.00. The median estimate represents a 21.79% increase from the last close price of GBX 214.30.