Lyons tipped to be Towergate chair in wake of Advent deal

Admiral chairman Alistair Lyons was tipped to replace Peter Cullum as chair of Towergate this week following the completion of the consolidator’s £930m debt refinancing and £200m deal with private equity investor Advent.

Lyons has been appointed to Towergate’s board as an independent director, together with Advent directors Humphrey Battcock and Nick Rose.

They join Cullum and Towergate chief executive Andy Homer. Lyons has experience of steering businesses through flotation, but any board appointments need to be approved by the FSA. If he were to take the chair, Cullum would be expected to stay on the board, probably as vice-chairman.

In an exclusive interview with Insurance Times, Homer declined to comment on the makeup of the board before its first meeting and any discussions with the FSA. He also reiterated that he plans to stay in post until at least the end of this year, but said preliminary work on finding his replacement had begun.

He said: “I expect no change this year. In any event, I will continue as a director of Towergate for the foreseeable future.”

Towergate’s senior management is also thought to have been locked in to the consolidator, with incentives to see the business through to an initial public offering (IPO). Deputy chief executive Amanda Blanc, who was widely expected to take over from Homer, departed for a job at AXA late last year.

Homer said he and Cullum had not taken any money out of the business under the refinancing.

“We could have taken money out, but why would we? The IPO is where Peter and I will get most of our value,” he said. “For me, the magic of this deal is that Advent has come in, we’ve left all our money in with them and we are banking on growing this business through an IPO.”

Asked whether staff would have preferred to receive cash now, Homer said: “We can only do that if the shareholders all decide they’re going to take money out. I would not advise anyone to take their money out of Towergate right now. I would advise them to keep it in. Advent specialises in doing IPOs – that’s why we chose them – so staff have got a clear line of sight to that.”

Towergate now has a £90m acquisition fund. Homer said there were a couple of acquisitions in the pipeline but ruled out any transformational deals.

He said: “We’ve left our money in because we believe Towergate is going to grow through acquisition. We’ve made up our mind to IPO – it’s a good time to buy and I think the economy is going to improve and the market is going to harden.”

Homer ruled out integrating Towergate and smaller sister company CCV this year, saying the focus was on “business as usual”.“This year, we.get the numbers, get a good year with Advent under our belt, then in 2012 you will see a lot more change as we prepare for IPO,” he added.

The refinancing deal has reduced Towergate’s debt by £100m and bought down the cost of borrowing. Preference share holders Och Ziff and Reservoir have been replaced by Advent, which holds ordinary shares that offer better terms for Towergate, Homer said.

The long-term refinancing includes a £520m corporate bond issue and £410m of new bank debt facilities, of which £90m will be used for acquisitions. The bond issue, led by JP Morgan and Credit Suisse, was priced on 4 February 2011.

The £410m bank facility has been agreed with a consortium of banks led by Lloyds Bank Corporate Markets and Goldman Sachs. Final repayment of the bank facility is scheduled for 2017, with the bonds following in 2018 and 2019.

In an unrelated development, Matthew Reed, chief executive of Towergate’s online trading portal PowerPlace has announced his departure. He will be working out his notice while the consolidator seeks a replacement.