In a deal that will almost double Goldman Sachs’ £3 billion insurance business in the UK, Rothesay Life – the insurance arm of the investment bank has acquired the majority stake of Paternoster – the specialist pension insurer for £260 million. Paternoster was set up by former Prudential executive Mark Wood and the current deal ends nearly a year of uncertainty.
Last month the bank had bought out almost all shareholders, except Deutsche Bank – holding 40 percent of shares in Rothesay Life, which refused to sell citing lower valuations until last week.
Paternoster runs the insurance business of Texaco, Emap and P&O among others and was closed to new business since the financial crisis hit the market.
Apart from Deutsche Bank, UK brokerage Numis, hedge funds Lansdowne Partners and Polygons along with US Private Equity firm Eton Park had infused £512.5 million of equity capital in total and the current valuation is a huge loss to the investors.
The acquisition helps Goldman since Rothesay’s hold high quality bonds which the bank can use to raise capital as well as meet new liquidity requirements. Goldman will not have access to the insurer’s portfolio directly, but Rothesay can always swap its liquid assets with the parent and other banks for other assets.
“This business is about long-term liquidity, we have an arm’s length relationship with Goldman – we trade with them, but we also trade with others”, said Addy Loudiadis, Chief Executive of Rothesay Life.
The Paternoster board announced “following a sale process, shareholders holding a majority of shares have entered into an agreement pursuant to which they intend to sell their shares to Rothesay, subject to regulatory approval and certain other terms and conditions.”
“The Board of Paternoster believes that this transaction would create an excellent combination to exploit the opportunities in the growing bulk annuity market and enhance the long term security of its policyholders”, it added.