Cullum’s Towergate stake dips to 40% as Advent enters

Towergate executive chairman Peter Cullum’s stake in Towergate has reduced to around 40% from 65% after global private equity firm Advent’s £200m investment in the consolidator this week.

Cullum will remain Towergate’s single-largest individual shareholder, with Advent snapping up a shareholding of around 45%, valuing the company at £445m. But sources said Towergate’s actual value was closer to £1.5bn when including debt, preference shares and other assets.

Insurance Times understands that Advent’s ultimate shareholding when it exits after a flotation, expected in three to five years, will depend heavily on performance.

Towergate has until the end of next week to secure: £570m of corporate bond financing; its bank loans; and the completion of its £200m deal with private equity backer Advent.

The consolidator’s chief executive Andy Homer welcomed the Advent deal, announced on Monday after weeks of speculation, and said it was “business as usual” at the broker.

Homer and Towergate’s founder and executive chairman Peter Cullum, both nearing retirement age, have committed to stay at the broker for the foreseeable future. Industry sources speculated that Cullum’s role might change if Advent brings in an independent chairman to prepare the business for an initial public offering (IPO).

Otherwise, the management team – which saw the departure of deputy chief executive Amanda Blanc to AXA late last year – is expected to remain broadly stable. Homer said: “We are both going to be around for as long as we can see forward. Certainly in 2011, nothing is going to change.”

Homer would not comment on the bond financing. But it is believed the money will come mainly from the UK and European markets. Towergate abandoned a bid to raise £665m in May last year, blaming troubles in the corporate bond market at the time. The total sum it is seeking this time round is likely to be a little more, with the corporate bond element making up £570m. This is being arranged by four banks: Lloyds TSB, JP Morgan, Credit Suisse and Goldman Sachs.

It is believed the rest of the financing will come from a consortium of banks, led by Lloyds TSB. Its managing director of insurance, Bill Cooper, said: “We’re very supportive of the whole transaction.”

Cullum and Homer have not taken any money out of the business.

Advent has also taken a stake in Towergate’s sister company CCV. Towergate will use around £100m of the private equity cash to finance small broker acquisitions. Homer confirmed that, as a major shareholder, Advent would have more than one seat on Towergate’s board, but said the details still had to be confirmed with the FSA. Hedge funds Och Ziff and Reservoir will be removed from the board.