For investors who stayed in from the IPO of Cover-More (CVO) in December 2013 at $2 a share, yesterday’s news of a takeover bid from Zurich Insurance at $1.95 a share will be a bitter outcome.
The shares failed to trade above its listing price of $2 a share, dropping to $1.60 in early trading after it listed at and then recovering to close at $1.77.
The shares did regain and top the $2 level at various times in 2014, 2015 and earlier this year, but since February 1, when they ended at $2.09, it has been a slow slide to around $1.32 late last week.
But the company has disappointed more than it pleased and the poor performance on day one set the tone of market belief in the stock for its time on the exchange.
And then three years later, almost to the day, up pops Zurich yesterday morning with its $1.95 offer (worth $741 million), and naturally Cover-More’s board says take the money and run.
The offer of $1.95 a share is a 48% premium to Cover-More’s last closing price of $1.32. Shares in the company closed up 47% at $1.87 yesterday as investors concluded there would be no counter bid because this offer was pretty fully priced.
Cover-More chairman Louis Carroll said the board believed the sale of the business would be positive for shareholders.
“This reflects the strategic value of Cover-More’s business including its strong market position, global distribution footprint and its ability to deliver growth into the future,” he said in a statement.
He said Zurich proposes to operate Cover-More as a discrete business and retain the company’s management team.
Cover-More chief executive Mike Emmett said the company would be well positioned to accelerate growth in the global travel insurance market under the takeover.
"This is an acknowledgement of our expanding global footprint, specialist travel insurance capability and market-leading partnerships in key markets," he said.
Under the terms of the deal, Cover-More will be allowed to pay an interim and a special dividend, which would reduce the cash amount of the offer.
Cover-More said it expected earnings before interest tax, depreciation and amortisation of between $54 million and $57 million for the 2016-17 financial year.
Shareholders will vote on the scheme of arrangement at a meeting in late March or early April.
