Goldman Sachs to buy 50% stake in Hastings

Investment bank Goldman Sachs has agreed to buy a 50% stake in personal lines insurance group Hastings, valuing the entire company at £700m.

The acquisition has been rumoured for several weeks, although Goldman was expected to buy a minority stake in Hastings.

The deal, conducted by Goldman Sach’s merchant banking division (GS MBD) will be financed through a mixture of equity and new debt financing. It remains subject to regulatory approval.

Hastings underwent a management buy-out in 2009 and has grown rapidly since. For the year to 30 June 2013, the broking and insurance firm placed £444.1m of gross premium and reported adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of £83.3m.

The Goldman Sachs purchase therefore values Hastings at 8.4 times adjusted EBITDA.

The team that led the management buy-out will retain a 50% stake in the business. Existing management, led by chief executive Gary Hoffman, will also remain invested in the group.

Hastings’ current shareholder base comprises both management and a significant number of its employees.

Hastings said it is “delighted” that the Goldman deal will now allow a large proportion of Hastings staff to be rewarded for their role in the success of the business to date.

Hoffman said: “Hastings is a fast-growing, successful general insurance business. We have a clear strategic plan to continue providing refreshingly straightforward insurance. We are proud of what we do, but know we can get better – we intend to be a force for good in the industry.

“GS MBD’s decision to invest with us, and join us in the next stage of our journey, is a strong tribute to all the hard work that everyone in the Hastings team has put in so far. It has been a great growth story in challenging economic times and we are well placed to compete even more successfully in the future.”

Hastings chairman Neil Utley added:” I believe that GS MBD is the best partner for us to realise our goals within the business and in the future. As part of the buy-out team, I am personally committed to the partnership and the continued success of the group.”

GS MBD’s global head of financial services investing Sumit Rajpal said: “We have been extremely impressed by the quality of the Hastings management team and by what they and the founding shareholders have achieved over the past few years.

“Hastings has a unique business model, well equipped for the digital age, with ambitious targets for continued growth. We are excited to partner with the management team and the existing shareholders to help Hastings achieve the next stage of its growth.

Evercore Partners and Peel Hunt acted as financial advisers to Hastings in connection with the transaction. Goldman Sachs International acted as financial adviser to GS MBD.