TPL Direct Insurance

TPL Direct Insurances flight to value-addition is progressing swiftly. Greenoaks Global Holdings Ltd, which is a UK-based insurance venture and an affiliate of Rosewood Insurance Group, seems keen to take the possession of this Pakistani insurance player that holds no more than 2 percent share of Pakistans private non-life insurance sector.
Earlier in October 2014, Greenoaks entered into an SPA with TPL Trakker, the holding company of TPL Direct Insurance, to acquire 33 percent of the total issued share capital of the company (Read TPL Direct Insurance takes the next step, published on October 14, 2014). And within a brief span of one month, it has made a public offer to acquire 16.3 percent of the total issued share capital or 7,500,500 shares of the target company at an offer price of Rs30 per share.
With regards to the average six-month trading price of Rs19.69 of TPL Direct, the offer price suggests an attractive premium of nearly 52 percent. However, with respect to yesterdays close of Rs27.15, it translates into a decent premium of 10 percent or Rs2.85 per share.
Moreover, in terms of its book value, the premium becomes even more tempting at a level of as high as 190 percent. Perhaps, a striking deal for its stakeholders and a good opportunity to book capital gains for market pundits! Though, for long-term investors, it makes more sense to retain than to offload as any turnaround would mean sky-rocketing gains in the longer run.
This acquisition frenzy has also led to a rapid boost in the companys trading activity. The monthly average turnover of the TPL Direct Insurance soared to 110,237 shares during October-November from 14,600 shares in the beginning of the year. Interestingly, the activity started gaining momentum ever since the news of this acquisition came out. Further icing on the cake is the whopping rise of 171 percent in its share price since January 2014.
Moreover, Greenoaks plans seem to be far-reaching. The public offering document also hints that the company shall opt for a fresh subscription to further raise its aggregate shareholding to 59-74.9 percent. If achieved, this will bestow Greenoaks with a controlling stake in the company. Nonetheless, TPLs rising premiums and profitability make it a good pick for the UK-based insurance venture. Yet, only time will tell how effectively the foreign technical expertise is put to use!