Shares in Quindell (QPP) climbed 5 per cent after the embattled group agreed to sell its professional services business to Australian law firm Slater and Gordon (ASX:SGH). The deal, which requires shareholder approval, would net £637m in cash for the insurance claims processor. Quindell plans to return up to £500m - or 113p a share - to shareholders, and use the remainder to invest and pay off debt.
The deal includes the transfer of about 53,000 noise-induced hearing loss cases to Slater & Gordon. Quindell is entitled to half of the net fees from the cases that are settled by end-June 2017, and a payout equal to half the net present value of any cases still unresolved by then. Management think the payout could be “significant”.
Management expect the sale of the professional division - which accounts for over four-fifths of total sales - to simplify and focus the business. A nixed deal, meanwhile, would "constrain" the company, likely forcing it to refinance. Quindell plan to "prudently incubate, develop and grow" its remaining insurance-focused technology operations, which include its connected car and telematics businesses, Himex and iter8, and tech-driven insurance brokerage Ingenie.
Quindell chief Robert Fielding expects to leave with the division and resign from the board. The group also plans to replace four other directors. Management intend for the new-look business to meet the "highest standards" of corporate governance.
Quindell also shed light on its much-maligned accounting policies. Consultants found that Quindell's core businesses and staff were "stressed" by "overaggressive" growth. And the first draft of PwC's independent review found that the group's revenue recognition and cost deferrals were "largely acceptable" but "at the aggressive end of acceptable practice". It also flagged some policies as inappropriate; for instance, accounting for hearing loss claims wasn't backed up by sufficient historical data. Management plan to enact more conservative accounting practices, and rejig the company's historical sales and profit figures.
