REG - B.P. Marsh &Partners - Sale of Shareholding in Kentro Capital Limited

B.P. Marsh & PartnersAnnouncement

23/05/2023 07:00

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RNS Number : 2672A  B.P. Marsh & Partners PLC  23 May 2023

23 May 2023

 

B.P. Marsh & Partners Plc

("B.P. Marsh", "the Company" or "the Group")

 

Sale of Shareholding in Kentro Capital Limited ("Kentro")

 

B.P. Marsh and Partners Plc (AIM:BPM), the specialist private equity investor
in early stage financial services businesses, is pleased to announce the
disposal of its entire 18.7% shareholding in Kentro, subject to FCA approval
being granted.

 

Highlights:

·    £51.5m (net of all transaction costs) cash consideration expected to
be received from the disposal of its 18.7% holding in Kentro, subject to
regulatory approval

·    Money multiple on Equity Investment of 3.41x

·    Internal rate of return to B.P. Marsh of 25% (inclusive of all income
and fees)

 

Sale of Shareholding in Kentro

 

B.P. Marsh agreed on 22 May 2023 to dispose of its shareholding in Kentro, the
London-based insurance industry investment group, pursuant to an agreement by
which Brown & Brown, Inc. ("Brown & Brown"), one of the largest
US-based insurance intermediaries, has agreed to acquire the entire issued
share capital of Kentro.

 

The Completion of B.P. Marsh's disposal of its 18.7% stake to Brown &
Brown and of Brown & Brown's acquisition of the remaining interests in
Kentro not owed by B.P. Marsh will be subject to, inter alia, the FCA's
approval of change of control.

 

Background to the Investment

 

B.P. Marsh originally invested in Kentro (then known as Nexus Underwriting
Management Limited) in August 2014, with an initial equity investment of
£1.5m for a 5% shareholding.

 

B.P. Marsh has overseen Kentro's growth through a longstanding partnership and
the further provision of £13.6m of capital, increasing its shareholding to
18.7%, Kentro's largest single investor. This investment, alongside bank
financing, allowed Kentro to commence its acquisitive growth strategy, via
both Nexus Underwriting Limited ("Nexus"), the underwriting (or "MGA") arm,
and Xenia Broking Group ("Xenia"), the broking arm.

 

Since B.P. Marsh's first investment, Kentro has made 23 acquisitions, growing
from Gross Written Premium of c.£55m in its year ending 31 December 2014 to
now over £500m.

 

With B.P. Marsh's support, the underwriting arm, Nexus, underwrites across a
diversified portfolio of 20 risk classes, through a network of over 800 retail
broker partners in nine countries. Xenia is one of the largest retail trade
credit brokers in the UK, with over 1,500 policyholders ranging from large
corporates to SME customers. The collective Kentro team is composed of more
than 350 insurance professionals operating from offices in the UK, US, Europe,
Asia and Dubai.

 

The Transaction

 

Upon completion, the Group expects to receive £51.5m in cash (net of all
transaction costs), which is consistent with the Group's most recent £51.5m
valuation of the business as at 31 July 2022, underlining our approach to
investment valuation.

 

Subject to completion, this would increase current funds to £55.2m after
transaction costs and tax.

 

Dan Topping, the Company's Nominee Director on the Board of Kentro, will
resign from this role on completion of the sale.

 

The investment and subsequent sale of the Group's holding in Kentro is another
example of B.P. Marsh's successful strategy of investing for the long term, in
start-up and early stage businesses with ambitious management teams. This
allows the Group to work with management to help them grow their business,
before disposing of its stake at a beneficial time for management and B.P.
Marsh.

 

Commenting on this disposal, the Group's Chief Investment Officer, Dan Topping
stated:

 

"It has been a pleasure to work with Colin Thompson and the whole team at
Kentro over the past nine years and to see the business grow and flourish. The
partnership with Brown & Brown offers an exciting future for them, and we
wish everyone at Kentro every success.

 

"This investment and sale exemplifies our ability to identify niche
opportunities and to back successful management teams and to successfully
realise value for our shareholders. This disposal will deliver an Internal
Rate of Return of 25% (inclusive of all income and fees) and a money multiple
on the Equity Investment of 3.41x."

 

Colin Thompson, Kentro's Founder and CEO, commented:

 

"We have been incredibly privileged to have partnered with B.P. Marsh over the
last nine years, a period of time that has seen transformational development
and growth in this business.  We are currently a business management in
excess of £500m of GWP out of 9 countries and employing over 350 teammates.
 Our ability to build this platform would not have been possible
without the guidance and support B.P. Marsh."

 

Use of Proceeds and Further Announcement

 

The Board of B.P. Marsh intends to continue to strike a balance between
utilising funds for investment for long-term capital growth, whilst providing
shareholders with a meaningful ongoing return.

 

Following the completion of the disposal, the Board anticipates that the
Group's future investment opportunities and significantly enhanced cash funds
should mitigate any reduction of income from Kentro (in the year ended 31
January 2022, Kentro contributed £1.0m to the Group's total income from
investments).

 

Further information regarding B.P. Marsh's proposed use of the proceeds from
this sale, and confirmation of the Group's ongoing strategy, will be announced
to the market as soon as practicable.

 

 

Note

This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 as it forms part of UK domestic law by virtue of
the European Union (Withdrawal) Act 2018.

For further
information:

 

 B.P. Marsh & Partners Plc                                            www.bpmarsh.co.uk
 Brian Marsh OBE                                                      +44 (0)20 7233 3112

 Nominated Adviser & Broker

 Panmure Gordon
 Atholl Tweedie / Stephen Jones / Amrit Mahbubani / Ailsa MacMaster   +44 (0)20 7886 2500

 Financial PR & Investor Relations
 Tavistock                                                            bpmarsh@tavistock.co.uk
 Simon Hudson / Tim Pearson                                           +44 (0)20 7920 3150

 

Notes to Editors:

B.P. Marsh's current portfolio contains sixteen companies. More detailed
descriptions of the portfolio can be found at www.bpmarsh.co.uk.

 

Since formation over 30 years ago, the Company has assembled a management team
with considerable experience both in the financial services sector and in
managing private equity investments. Many of the directors have worked with
each other in previous roles, and all have worked with each other for
approaching ten years.

 

- Ends -

 

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