Private equity group Blackstone has sold its stake in Rothesay Life, one of the UK’s biggest privately owned insurers, for £2.1bn in a deal that values the company at £5.75bn.

Blackstone has been a major shareholder in Rothesay since 2013 when it bought a 29 per cent stake, and it has topped up its investment since then by putting in more money to back growth and buy out other shareholders including Goldman Sachs. Last year it contributed to a £900m fundraising, which Rothesay used to back new business.

Now it is selling its 36 per cent stake to US-based insurer MassMutual and GIC, the Singapore sovereign wealth fund, both of which are already big shareholders in Rothesay. After the deal they will each own 49 per cent of the company.

Qasim Abbas, senior managing director at Blackstone, said that MassMutual and GIC were “the natural long-term holders for Rothesay”.

In the past, Rothesay has been seen as a candidate for an initial public offering, but chief executive Addy Loudiadis last year played down the possibility, saying that the support of private shareholders meant it did not need to float.

The deal represents a big jump in Rothesay’s valuation. When Goldman Sachs sold its stake in the company three years ago, it was valued at just £2bn.

Rothesay specialises in buying up old books of life insurance business from companies that no longer want to own them. It also takes over corporate pension schemes via deals known as buy-ins and buyouts. It competes with Pension Insurance Corporation, which is also privately owned, and listed companies such as Legal & General.

In the past few months, Rothesay has taken on pension schemes from IPC Media, Littlewoods and RockRose Energy.

Since Blackstone first invested in Rothesay, its assets under management have grown from £7.5bn to £56bn.

The sale of Blackstone’s stake comes just weeks before Rothesay will go to the Court of Appeal to try to push through one of its biggest-ever deals.

In August last year, the High Court blocked Rothesay’s proposed acquisition of a £12bn block of annuities from Prudential. The judge ruled that Rothesay did not have the same heritage or diversification as Prudential, whose UK business is now owned by M&G Group.

The ruling shocked the insurance industry, with many people saying it could prevent other deals from happening. Private equity-backed groups such as Rothesay are increasingly bidding to take on old books of life insurance business, freeing up capital for the insurers that originally sold the products.

Rothesay and M&G are appealing against the decision, with the case due to be heard in late October.

Source: Financial Times

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