Homeserve, the insurer which covers emergencies such as burst pipes, is in talks to buy household appliance warranties group Domestic & General, in a deal that could be worth more than £500m.
Confirmation of the talks saw shares in D&G soar 69p to £13.23p this morning, an increase of over 5%.
Shares in Homeserve dropped 77p to £19.25 on prospects of what would be a major expansion move for the group, which is capitalised at around £1.3bn.
It said a combination of the two businesses would accelerate its strategy of providing total home emergency cover, but cautioned that the approach is at a preliminary stage and might not lead to an offer.
Homeserve also today reported a better than expected 26% jump in full-year profits, to £67.7m in the year to the end of March, on revenues 30% ahead at £477m.
There is a 17.5p final dividend, taking the total for the year to 25p, an increase of 25%.
Kevin Lapwood, analyst at Seymour Pierce, said the acquisition of D&G would be a good move for Homeserve, although the deal might face regulatory problems.
“On top of its potential for growth in Europe and North America, the deal could propel Homeserve into a new growth phase,” he said.
Fiona Walsh
Monday May 21, 2007
Guardian Unlimited