Travel insurer hopes to raise $521m in a big year for floats
The company, which is 82.7 per cent owned by Crescent Capital Partners, plans to sell 260.2 million shares for $2 each in an offer closing shortly before Christmas, it said in a prospectus published on Monday.
With Crescent holding onto a 13 per cent stake, the share sale would put the insurer's market capitalisation at $635 million, and make it one of the biggest floats of the year.
Chief executive Peter Edwards said strong market conditions had played a role in the decision to float, as well as healthy growth in the company's profits under Crescent's ownership since 2009.
Cover-More is Australia's biggest provider of travel insurance. It has a 40 per cent of the domestic market and agreements to sell policies through companies including Flight Centre, Harvey World Travel, Medibank Private and Air New Zealand.
The prospectus says net revenue grew at a compound annual rate of 18 per cent in the past five years, and forecasts revenue growth of 10 per cent this financial year.
Crescent will continue to own 13 per cent of the business until at least after the 2014 financial year results, but Mr Edwards said this was not a response to investor concerns.
"This is a business that hasn't just popped up overnight. It's been running for 27 years," Mr Edwards said.
While floats of private equity-owned companies often arouse the scepticism of investors, he said, under Crescent's ownership the company had diversified its distribution in Australia.
"This is not something that's been dressed up for sale, it's a long-term sustainable story."
The company is also seeking to tap into growing demand for insurance from middle-class consumers in India and China and has a presence in Malaysia, Singapore, Britain and New Zealand. It owns a business that provides emergency medical help overseas.
In a strong year for floats Nine, Dick Smith, and credit information provider Veda are preparing to float later this week.
Frequently Asked Questions about this Article…
Cover-More is Australia's largest provider of travel insurance, holding 40% of the domestic market. The company is going public to raise $521 million through an initial public offering, leveraging strong market conditions and healthy profit growth under its current ownership.
Cover-More is currently 82.7% owned by Crescent Capital Partners. After the IPO, Crescent will retain a 13% stake in the company, which will have a market capitalization of $635 million.
Cover-More has experienced robust financial growth, with net revenue increasing at a compound annual rate of 18% over the past five years. The company forecasts a 10% revenue growth for the current financial year.
Cover-More is a well-established company with 27 years in the business. It has diversified its distribution channels in Australia and is expanding into international markets like India and China, tapping into the growing demand for insurance.
While private equity-owned company floats can sometimes raise investor skepticism, Cover-More's long-term sustainability and diversified distribution strategy under Crescent's ownership mitigate some of these concerns.
The funds from the IPO will likely support Cover-More's expansion into international markets and enhance its service offerings, including its overseas emergency medical help business.
Cover-More's partnerships with major companies like Flight Centre and Medibank Private enhance its distribution network, allowing it to reach a broader customer base and solidify its market position.
Cover-More is one of the biggest floats of the year, alongside companies like Nine, Dick Smith, and Veda. Its strong market position and growth prospects make it a notable player in the 2013 float rush.
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