Cobra Holdings PLC : Disposal of subsidiary

COBRA Holdings PLC

Sale of subsidiary

For immediate release

8 December 2011

Since the announcement of the sale of the its insurance broking businesses at Caterham and Alton, the Board of COBRA Holdings PLC ("COBRA") has negotiated the terms of the disposal of another non-core part of the Group.

The Board of COBRA announces that following the solicitation of competing offers, a contract has been signed for the sale of its subsidiary, COBRA Corporate Solutions Limited ("CCS").

The purchaser of CCS is ISO Investments Limited, a company controlled by Phil Truman who is the managing director of CCS and is also a significant shareholder in COBRA.  The AIM Rules classify transactions between AIM quoted companies and a significant shareholder as "related party transactions" requiring that directors who are not involved in the transaction consult the company's nominated adviser and make certain public disclosures.  The Board (none of whom are involved in the sale of CCS), having consulted with Fairfax I.S. PLC (COBRA's Nominated Adviser) consider the terms of the sale of CCS to be fair and reasonable insofar as shareholders are concerned.

CCS' business, profits and net assets

CCS is a commercial insurance broking firm focused on managing the placement of risks with substantial capacity requirements, complex insurance needs and global exposures for high value corporate clients.  It targets businesses with annual turnovers that exceed £20m and has no specific industry focus. CCS' retail clients usually pay in excess of £50,000 each in annual premiums or generate some £10,000 or more annual brokerage income. CCS believes that its associated services and analytical approach outside of the renewal cycle give it a competitive advantage when tendering for any insurance programme.

The most recent audited accounts of CCS were prepared for the year ended 31 March 2011 and showed turnover of £2.471 million (2010 - £1.998 million), pre tax profit of £267,000 (2010 - £306,000) and net assets of £330,000 (2010 - £673,000).  The reduction in net assets during 2010 was primarily caused by a £600,000 dividend paid to COBRA Holdings PLC during the year ended 31 March 2011.

Terms of the contract for the sale of CCS

The consideration payable by ISO Investments for CCS is £3,330,000 with initial consideration of £1,000,000 payable on completion.  The deferred consideration of £2,330,000 shall be paid following the purchase by COBRA of Mr Truman's 5,905,748 shares in COBRA at a price of 39.45p per share, which will enable Mr Truman to advance a loan to ISO Investments Limited, who will in turn pay the deferred consideration. 

A pre sale dividend of £230,096.30 was declared by CCS.  The net intra group balance owing by COBRA to CCS stood at £18,200 at completion and will be settled within 12 months following completion.

The contract contains normal and reasonable warranties and non competition covenants and restrictions.  It also provides for the payments (both ways) if COBRA clients move to or from CCS from / to other COBRA Group companies within the 5 year period following completion. CCS will continue to place business through the COBRA Network for a period of five years.

Application of the sale proceeds and effect of the CCS sale on COBRA

£313,826 together with interest of £13,419 of the initial £1 million cash received will be used to redeem COBRA loan notes held by Mr Truman.  The balance will reduce the COBRA Group's borrowings. 

The remainder of the proceeds will be applied by COBRA to buy and cancel COBRA Shares, which will reduce the number of Shares in issue. The sale of CCS will reduce the COBRA Group's turnover and profits, but is also expected to enable COBRA to reduce its cost base.  The reduction in the number of COBRA Shares in issue will result in the remaining earnings being spread over fewer COBRA Shares, mitigating the impact on earnings per share.

The sale proceeds (net of costs) exceed the book value of CCS in COBRA's consolidated accounts (prior to certain accounting adjustments) by some £1.5m however this gain on sale will be set against a similar loss on sale on the recently announced disposal of COBRA's insurance broking operations in Caterham and Alton to ASG Risk Management Ltd.

Enquiries:

COBRA Holdings PLC

David Stanley, Finance Director                                                 Tel:  [phone]

Fairfax I.S. PLC  Nominated Adviser

David Floyd                                                                             Tel:  [phone]