Oval PE backer Caledonia makes £27.3m profit on sale to Gallagher

Private equity firm Caledonia has made £70m by selling its 25.4% stake in Oval to Gallagher.

Caledonia had valued its Oval shareholding at £42.7m, meaning that it made a £27.3m profit on the sale.

Gallagher announced earlier today that it was buying Oval for £199m.

Under the terms of the deal, Caledonia will get an immediate cash payment of £67.6m for its stake.

The remaining £2.4m will be placed into an escrow account and released to cover any warranties and balance sheet adjustments. If the money is not used, it will be released to Caledonia over three years.

Caledonia said it would bank the initial proceeds for future investment.

Caledonia has held a stake in Oval since the broker’s formation in 2003. It said it has received a return equivalent to 1.9 times the money it invested.

The private equity firm initially invested £15m in Oval as a combination of equity and loan notes. It subsequently put in a further £29.7m as the company developed.

It has received payments from the broker of 16.6m over the years, mainly in loan-note interest.

Caledonia’s head of unquoted investments Duncan Johnson said: “We are delighted to report the sale of Oval to Gallagher after an 11 year relationship with the business.

“Gallagher represents a very good home for Oval and I’m sure that the business will continue to flourish under its ownership and Peter Blanc’s leadership.”

He added: “Caledonia’s investment in Oval is a great example of our longer term unquoted investment horizon providing support and capital to private companies beyond the typical three to five year term that is traditionally the focus of the private equity industry.”

Oval chief executive Peter Blanc said: “Caledonia has been a great, longer term backer of Oval providing the support to allow us to create the Oval of today.

“By joining forces with Gallagher we will become one of the most powerful brokers in the UK market and I am very excited about the opportunities for our staff and clients. With Caledonia’s backing we have purchased over 30 businesses, all of which are now fully integrated, and we are ready to embark on the new opportunity with Arthur J Gallagher.”