Brightside deal in doubt as Markerstudy cuts offer

Markerstudy’s planned takeover of Brightside is in doubt after Markerstudy cut its proposed offer for the listed broker to between 20p and 22p a share from 27p.

Brightside appears to have rejected the lower offer by refusing Markerstudy’s requests to extend the offer deadline, which is currently set at 5pm today.

Markerstudy says it wants an explanation from Brightside.

Offer cut

Markerstudy has not yet made a formal offer for Brightside, but wrote to the company on 15 July with an indicative offer price of 27p a share, valuing Brightside at £123.2m.

However, the motor insurer has lowered its indicative offer after Brightside’s 31 July trading update, when the broker said it expected growth of new online policy sales to be restricted by the amount of available underwriting capacity.

Brightside revealed in its update that insurer Southern Rock had “significantly” reduced the capacity it provides to Brightside’s eCar online motor insurance offering.

Markerstudy said in a stock exchange statement last night: “Markerstudy concurs with this negative statement by the board of Brightside and Markerstudy has therefore reduced its valuation of Brightside from the indicative offer price of 27p per share made in writing on 15 July 2013.”

The new indicative offer of between 20p and 22p would value Brightside at between£ £91.3m and £100.4m.

Rejection

Under City takeover rules, Markerstudy has until 5pm today to submit a formal offer for Brightside or indicate that it will not be making an offer.

The company has asked for the deadline to be extended for four weeks while it puts in place the final debt arrangements to fund the purchase. The company says Brightside’s negative trading update has been “a contributory factor” to the delays in securing the required debt financing.

However, it added that Brightside has so far refused the request, rendering Markerstudy unable to make a formal offer by 5pm.

Markerstudy said Brightside’s refusal ”effectively amounts to a rejection of Markerstudy’s 20-22p valuation level.”

Explanation wanted

Markerstudy, which already owns 11.4% of Brightside, has also asked for explanations of why the broker thinks it is worth more than the new offer, and how it plans to tackle the issues outlined in its trading update.

The statement said: “In particular, as a significant shareholder in Brightside, Markerstudy will be expecting an explanation of initiatives to address the current profit trend set out in Brightside’s trading update of 31 July 2013, prospects for new third party underwriting capacity, to clarify all related party transactions and payments, ongoing governance including board composition and a clear statement of future strategic direction.”

It added: “Markerstudy accepts that there may well be differences of opinion between Markerstudy and Brightside as to the value of the Brightside business, but believes that the board of Brightside should clarify the reasons for their views publicly for all shareholders before effectively ruling out the possibility for Markerstudy to make an offer.”