Apollo and Capita fight for Xchanging - FREE

Apollo and Capita fight for Xchanging - FREE

Another insurance sector merger tussle has begun, with Capita and private equity fund Apollo in the running to buy Xchanging, the London market insurance technology firm has revealed.

Capita, a business services outsourcing specialist, made its first offer to acquire Xchanging on August 11 for a 140p per share takeover.

However, this price was rejected by Xchanging’s board, who felt the offer undervalued the company.

That price was then upped, three separate times, to become 160p-per-share or £398m by September 24, which Capita has said is its final offer, and was then accepted by Xchanging.

Meanwhile US-based Apollo Global Management stepped in, proposing a 170p-per-share bid, on an undisclosed date.

Capita's bid is 58% to the closing price per Xchanging share on September 24 and a premium of 45% to the closing price per Xchanging share on October 2, which was the last trading day before the announcement on October 4.

Xchanging said it has granted due diligence access to both sides, while its share price rocketed 53pc to reach 170p in the first half-hour of trading this morning (05/10/15).

In Xchanging’s half year results announced in June, the firm said: “Our business procurement management services and technology businesses have performed strongly in the first half of the year and the outlook is for this robust performance to continue in the second half of the year, although this is dependent on the timing of material Xuber contracts, and currency effects.

“In procurement, we have a clear strategic objective to address the profitability issues in the second half of the year. The outlook for the full year is a trading performance in line with last year and a return to growth in the full year 2016,” added the firm.

There is still uncertainty whether any deal will be accepted, under whatever terms, Xchanging stressed in its most recent statement.

The board of the technology firm urged its shareholders to hold their shares and to take no action.

A deal with Capita would allow Xchanging to become one of the leading technology services providers across the insurance and asset management sectors.

Capita said it believes a potential buyout would create at least £35m in cost savings for the two companies, across head office, shared services and in-house IT synergies.

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