Apax tries to gatecrash £1bn Cabot listing

The buyout firm Apax Partners has made a £1bn approach to buy Cabot Credit Management, Britain’s biggest debt collector, in an effort to derail plans for a bumper stock market float.

Sky News has learnt that Apax has been working on plans to buy Cabot since it emerged earlier this year that its shareholders were preparing to list the company in London.
Sources said on Wednesday that Apax, which has counted companies such as the fashion designer Karl Lagerfeld and high street retailer New Look among its investments, was among a number of parties to have expressed an interest in a takeover of the debt collection group.
The private equity firm is not in active talks with Cabot’s investors, they added, saying that they were focused on pursuing a public listing.
Cabot’s shareholders are led by Encore Capital Group, a speciality finance company which is listed on New York’s Nasdaq stock exchange, and also include JC Flowers, another private equity firm.
Goldman Sachs, Jefferies and Morgan Stanley were hired several months ago by shareholders in Cabot, which trades under brands such as Cabot Financial and Apex.
An initial public offering of Cabot would make the company the latest UK-based debt collection group to float, following the listing of Arrow Global in 2013.
Arrow has performed strongly on the stock market, adding further encouragement to Cabot’s investors to take the company public.
Apax has explored other deals in the consumer finance sector, and was reported last year to be considering an approach to buy Arrow.
In May, Encore confirmed that it was exploring an IPO of Cabot.
“Since we purchased Cabot with our partner JC Flowers, we believe Cabot’s equity value has grown through operational improvement, market consolidation and expansion into other European countries.
“We are in the very early stages of the IPO process, but we believe that it could be completed as early as the back end of 2017,” said Encore’s president and chief executive, Kenneth Vecchione.

Analysts have said that valuing Cabot precisely is challenging based on information filed at Companies House, although public disclosures show that earnings before interest, tax, depreciation and amortisation in the nine months ending September 2016 rose 24% to £180m.
In the debt portfolios it manages, the company estimates £2.1bn of remaining collections over the next decade.
Cabot, which also owns the debt collection agency DLC and Mortimer Clarke Solicitors, has built its UK business by acquiring assets from banks which have been seeking to meet increasingly onerous regulatory capital targets.
The company also operates in markets such as Ireland and Spain.
It says it has invested close to £2bn in buying portfolios with a face value of more than £20bn, and manages roughly £1bn on behalf of clients.
If it does pursue a London listing, Cabot is likely to be among the largest companies to do so this year amid a relative dearth of new flotations.
Last year, Cabot was the first credit management service provider to secure full authorisation from the City regulator following a change in the supervisory regime.
Its other competitors include Lowell GFKL Group, which is backed by the private equity firm Permira and the Ontario Teachers’ Pension Plan.
Cabot’s board members include Peter Crook, the chief executive of Provident Financial, the listed consumer finance business.
An Apax spokeswoman declined to comment.

Source: SKY

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