Cobra completes acquisitions

Cobra has acquired three brokers, Giles Alton (Giles), JK Lee (JKL), GDK Insurance Services (GKD) and an underwriting agency, County Insurance Services Schemes (CISS). Giles is based in Hampshire, JKL is based in Manchester and GKD and CISS, which trade alongside each other, are based in Essex.

Cobra’s “hub and spoke” growth strategy involves the establishment of substantial regional offices (hubs) with smaller local offices (spokes). All of the acquisitions completed today will become spoke offices within the Cobra Group.

All three broking operations focus mainly on commercial lines, which as members of the Cobra Group, will be able to offer their customers additional insurance services and access to a wider range of underwriters than they could as independent businesses. As a result of the aggregation of its premiums with those of Cobra and its network, Cobra expects to generate higher commission levels and improved profitability from the acquired businesses at no cost to their customers.

Giles, whose last audited accounts were prepared for the year ended 30 April 2007, generated pre tax profits of £216,554 for that year and had net assets at that date of £1,065,768. The consideration payable comprises an initial cash payment of £1,000,000, and deferred cash payments of £1,950,000 in late April 2008, £180,000 in January 2009 and £670,000 in April 2009. In addition 166,667 new Cobra shares are to be allotted in late April 2008. Based on the closing price of a Cobra share on 3 April 2008 of 88.5p, the aggregate consideration amounts to £3,947,500.

JK Lee, whose last audited accounts were prepared for the year to 31 October 2006, generated pre tax profits of £162,954 for that year and had net assets at that date of £125,156. The consideration payable comprises of an initial cash payment of £722,500, the allotment of 204,000 new Cobra shares, a first deferred cash payment of £361,250 in July 2009 and a final deferred cash payment in July 2010 of between £361,250 and £511,250 depending on performance. There will also be two equal deferred cash payments of approximately £75,000 in October 2008 and July 2009. Based on the closing price of a Cobra share on 2 April 2008 of 88.5p, the aggregate maximum consideration amounts to £1,925,540.

CISS is a partnership, whose partners also trade through GDK The acquisition of CISS will include the agency’s group of independent insurance firms providing Cobra with a range of new marketing and sales opportunities to attract more members to the wider Cobra Network and Cobra London Markets.

Cobra has acquired the business and assets of both GDK. and CISS. The most recent accounts of CISS, which have not been audited, were prepared for the year ended 30 April 2007 and showed a net profit before tax for that year of £288,818 and net assets at that date of £142,081. The most recent accounts of GDK., which have not been audited, were prepared for the year ended 30 November 2007 and showed a net loss before tax for that year of £22,790 (2006: audited loss £1,909) and net assets at that date of £127,988 (2006: audited £150,777). The combined consideration payable comprises of an initial cash payment of £1,000,000, a deferred cash payment of £1,295,000 in April 2008 and between £645,000 and £1,425,000 in July 2009, depending on performance. In addition, 360,000 new Cobra shares are to be allotted in late April 2008. Based on the closing price of a Cobra share on 2 April 2008 of 88.5p, the aggregate maximum consideration amounts to £4,038,600.

Steve Burrows, chief executive of the Cobra Group, said: “These acquisitions demonstrate Cobra’s commitment to taking advantage of the opportunities for consolidation in the insurance broking market, in particular in the provincial markets. These businesses introduce new revenue streams and opportunities to the group. We look forward to leveraging these opportunities to provide a broader range of products and improved services to customers and Network members.”