Banks take over EIS as Zurich talks collapse

Erinaceous Insurance Services (EIS) has been taken over by its banks and placed into a special purpose vehicle, after sale talks with Zurich collapsed over price.

A new holding company, Caley, owned by the banks was created today to take charge of EIS, pending approval by the FSA. The news follows the company’s parent group, Erinaceous, being placed into administration.

In an exclusive interview with Insurance Times, group chief executive Tim Redburn and executive chairman of EIS Leslie Goodman confirmed that talks with Zurich had broken down due to a dispute over the timing of the deal and the price. They said that Zurich’s offer for the business, despite being in excess of £100m, was deemed insufficient by its banks, HBOS, HSBC, and Lloyds TSB.

Sources suggested that Zurich’s ties to its European parent had slowed down negotiations.

&#8220We have given it over three months. We went to the banks a month ago and said, we have to draw the line.

Tim Redburn, group chief executive, Erinaceous

Redburn said it was now highly unlikely that EIS would be sold. He said: “We’ve given it over three months. We went to the banks a month ago and said, we have to draw the line. Zurich’s offer was not an acceptable place to be.

“The view from the banks was also that the process was taking too long. Now they have made a major strategic play. This effectively becomes a private equity investment.”

A three-year financing plan for investment in IT has been put in place, as well as plans for business development and recruitment. EIS will also rebrand.

Redburn said: “We’ve taken steps to consolidate the business. [To buyers] we’re saying, ‘you’ve had your chance’.” Goodman added: “Unless a suitor comes in and delivers a knockout blow, it will not be sold.”

&#8220Unless a suitor comes in and delivers a knockout blow, [EIS] will not be sold.

Leslie Goodman

EIS also revealed strong 2007 results, despite a below par first half. While the company’s social housing business, Farr, struggled, EIS posted pre-tax profits of £14.5m – in line with the previous year. Its commercial and property business generated a brokerage of £25.5m.

Goodman ruled out the possibility of redundancies, and played down the recent departure of managing director of letting subsidiary Letsure, Victoria Hotchkin, to Towergate. He insisted that no further senior departures were likely. He confirmed that a number of the company’s staff had been paid retention bonuses.

Both Redburn and Goodman added they would stay with the company for the immediate future.

EIS’s parent company, property services group Erinaceous, was placed into administration on Monday after its creditors pulled out of refinancing talks.