Who is striking for Cobra?

A takeover approach for Cobra should come as no surprise to the market.

The business, which revolves around a successful network controlling more than £350m in premiums, has grown in stature to become one of the UK’s largest insurance groups.

It consists of a number of companies, including a retail and Lloyds wholesale broker, underwriting agency and financial services division, and would give any potential buyer a significant distribution channel that could be bolted-on to an existing operation or developed as a brand new function.

In recent years, Cobra has acquired a number of brokers after adopting a regional hub and spoke strategy.

Yet potential suitors for the business are few and far between. And, with a market capitalisation of almost £40m, Cobra could demand a hefty price.

Towergate chief executive Andy Homer said last month that the company was interesting in acquiring another network, although emphasized that the company would focus on integrating its existing business. Broker Network has also been locked in takeover talks with Westinsure for several months, with chief Grant Ellis continually stating that only two or three networks will exist in the future.

Intriguingly, following Towergate’s bid for the Broker Network last year, Cobra commissioned a report by research firm Fairfax to highlight that its valuation had been underestimated in the context of the offer.

The report argued that Cobra should be valued higher than the Broker Network because it has a larger Underwriting Agency and larger Lloyds facility.

"We believe that the acquisition of Broker Network clearly underlines the value within Cobra Holdings. The shares are at least 50% undervalued on a take-out basis,” it said.

Giles, backed with private equity cash, could well be seen as a frontrunner as it continues to look for ways to increase distribution and expertise through larger acquisitions, while developing its underwriting operation.

Insurers may also consider Cobra as a business that could potentially add value. Axa’s broking subsidiary, Venture Preference, has been linked to networks in the past, although it is understood that the company is not likely to pursue a bid given the task at hand of integrating its existing £1bn GWP broker business.