Having acquired the 50 per cent of Gocompare.com it didn't own as recently as April last year, esure (ESUR) has announced a strategic review that could lead to the comparison website being demerged.
The decision, which also includes the appointment of Matthew Crummack (previously at lastminute.com) as chief executive of Gocompare, came as something of a surprise, as esure had already mapped out a plan to grow earnings to at least £50m by 2019. However, thanks in part to a vigorous marketing campaign, Gocompare has been growing strongly, and any decision to demerge could generate considerable value for shareholders.
This is a crucial point because esure paid just £95m for the share it didn't own, and having the power of veto over any potential buyer, it was in effect the only party with a chance to buy the remaining stake. However, according to estimates by Barclays Equity Research, the £190m valuation of Gocompare a year ago is more like £450m today, based on MoneySupermarket.com's valuation of 17.9 times 2017 full-year earnings. But with MoneySupermarket's valuation offering a potential 23 per cent upside, this would value Gocompare at nearer £575m.
It could be argued then that the early flotation option is an opportunity to crystallise the gains within Gocompare. Founder and chairman of esure, Peter Wood, still owns 30 per cent of the stock and a demerger would allow him to crystallise those gains sooner rather than later if he chose to.
Furthermore, bringing on Matthew Crummack with his experience at lastminute.com suggests that Gocompare could soon follow the likes of MoneySupermarket and Admiral's confused.com in diversifying away from motor insurance, which is the most mature of all the price comparison areas.
When he was chief executive at lastminute.com, Mr Crummack oversaw an upgrade to the site's digital and technology platforms and improvements in brand recognition that eventually led to its sale in 2015, whereas Gocompare's current chief executive Jon Morell has solely an insurance broking background.
