Although a deal has yet to be finalised both companies released a joint statement earlier this month and said: “We have reached agreement in principle on the terms of a recommended offer expected to be made by Grainger subject to a pre-condition that pre-acquisition due diligence is completed by Grainger to its satisfaction.”
Graeme Marshall, CEO of Sovereign Reversions, was unable to comment further on the bid because of regulatory restrictions. But he told Mortgage Introducer: “This has been a cracking good year for Sovereign.”
Terry Pritchard, managing director of equity release adviser Charterhouse Retirement Solutions, said: “The implications for Home & Capital depend on the shape of this deal.
“If the buyer wants to originate more new product, then that’s clearly a good thing for H&C. If not, then Home & Capital has already made provisions to offer other providers’ products, so the impact should be mitigated.
“If Grainger was the one to buy them it would be great for them – I understand that Sovereign has originated good quality reversion plans.
“I don’t think there’s a downside, other than the potential loss of another provider in the market.”
Sovereign has recommended the offer to its shareholders, which values their shares are 202p. Sovereign’s share price is currently 190p.
Market rumour suggests there is at least one other bidder which has expressed an interest in bidding for Sovereign.
The company announced that it has received confirmation for the extension of its loan facility due to expire in June 2010 by a further two years. This approval is subject to formal documentation.
In the financial year to 30 April 2010, proceeds from the sale of investment properties and shared equity loans exceeded £6.9m, an increase of 53% over the year to April 2009.
Sovereign has invested less than £0.5m in home reversion plans during the year.
Marshall added: “Sovereign has had a record year for cash generation from selling reversion plans and having renewed our financing for the longer term, we’re well placed to be a bigger player in what is now a smaller market.”
Grainger currently has approximately £2.1bn of assets and £2.8bn of assets under management.
