Hg Capital sells Sequel – HgCapital, the Manager of HgCapital Trust plc, has announced that it has sold Sequel Business Solutions, a provider of software and services to the Lloyd’s of London and the broader insurance markets, to Verisk Analytics (Nasdaq: VRSK), a leading data analytics provider serving customers in property/casualty insurance, natural resources, and financial services, headquartered in Jersey City, NJ USA.
The fund will realise cash proceeds of approximately GBP20.2 million on completion of the transaction. This represents an uplift of GBP12.5 million (161%) or 33 pence per share over the carrying value of GBP7.7 million in the Net Asset Value (“NAV”) of the Company at 31 May 2017 which was based on the Directors’ valuation as at 31 December 2016.
Based on the 31 May 2017 reported NAV (including all announced transactions and the revaluation of the carried interest provision), the pro-forma NAV of the Company is expected to increase to GBP659.2 million or 1,766.2 pence per share. The Company’s liquid resources available for future deployment are estimated to be GBP177 million (27% of the pro-forma 31 May 2017 NAV).
The investments were last valued at 31 December 2016. The 2017 interim results, including the re-valuation of the portfolio as at 30 June 2017 will be announced on 11 September 2017.
HgCapital partnered with the management of Sequel in July 2014 to support the acquisition from its founder. The deal represented the fourth investment for the Mercury 1 fund and resulted from HgCapital’s ongoing focus on the insurance software sector.
Led by CEO Mario Garcia and with HgCapital’s support, Sequel has transformed over this period. Its core Eclipse product set has been broadened to a full suite supporting all the complex risk activities of insurers and brokers, including risk aggregation, claims management and re-insurance; customer numbers have tripled; and Sequel’s business model has rapidly transitioned to recurring revenue. Over the past three years, the company has seen compound revenue growth of 14% per annum.
Following this sale, the Mercury 1 Fund will have delivered combined returns of 3.0x of invested cost and a c. 44% gross IRR on all realised investments, including proceeds from the prior sales of Zitcom to Intelligent (announced in June 2017 for 3.3x and 141% gross IRR) and Relay Software to Applied Systems (announced in August 2016 for 2.1x cost and 39% gross IRR). The Mercury 1 Fund has now delivered in aggregate 83% of invested cost on all realised investments.
Mario Garcia, CEO of Sequel, said: “I would like to thank HgCapital for being a great partner as we developed Sequel into the leading provider of software to the complex insurance market. They had a transformative impact on our business. We are thrilled to join Verisk, whose data and technology capabilities will allow us to continue to deliver first class service to our customers.”
Sebastien Briens, Partner at HgCapital, commented: “We are delighted that Sequel can continue to flourish with such a strong and capable partner. We are proud to have been associated with Mario and his team in driving the growth of Sequel in the past three years, and believe that the business is very well positioned to be successful within the property/casualty insurance markets.”