Shares in insurance Group Esure (LSE:Â ESUR)Â 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 ÂŁ95m, which will see the Group gain full ownership of one of the UKâs 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 âmost irritating advertisementâ award. Youâd be hard-pressed to find anyone in England not familiar with the over-exuberant tenor.
Management at Esure sites opportunities to âdrive expansion and diversification over the medium to long-termâ 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 ÂŁ125m of subordinated notes.
Gocompare reported revenue of ÂŁ110m and profit before tax of ÂŁ25m last year. Based on these metrics, the acquisition values the company at 7.6x earnings. Chief Executive Officer Stuart Vann said there were âsignificant opportunities for Gocompare to grow revenues and profitability over the medium to long-term.â
The acquisition seems conservatively priced compared to the markets, and this could be good business if Gocompare truly has room to grow.
