Quindell stock surged at the London Stock Exchange after the company said it will sell off its professional services business and clear out its entire board. Today’s announcement confirms rumors from earlier this year which suggested a sale of one of the company’s units.
The insurance provider has been struggling recently and, as a result, struck a deal with Slater & Gordon, an Australia-based personal injury firm.
Quindell deal worth £637 million
Sean Farrell of The Guardian reports that Quindell will receive £637 million in cash for its professional services business if shareholders approve the deal. In addition to that payment, Slater & Gordon will pay half of the net fees from noise-induced hearing loss claims. Quindell has been struggling under the weight of those fees as the number of claims reached 53,000.
By selling off the professional services business, Quindell will shed the greatest part of its business, as the segment makes up nearly 90% of its total revenue. The company will then become a firm focused on insurance technology.
Quindell CEO to go with business
If the deal is approved by shareholders, Quindell CEO Robert Fielding will go with the business and joint Slater & Gordon. He became CEO last June after an incendiary short thesis from Gotham City Research resulted in the ouster of the firm’s previous chief executive. Also Quindell finance director Laurence Moorse and directors Roberty Cooling, Robert Burrow and Robert Bright will leave the company.
Interim Chairman David Currie will become the non-executive director, while acting consultant Richard Rose will become Quindell’s chairman. Previously it had been planned that consultant Jim Sutcliffe would join the firm’s board, but that won’t happen if the deal moves forward.
Quindell said it would return £500 million to shareholders and more as revenue from claims roll in.
Quindell shares on a bumpy ride
Shares of Quindell rose as much as 13% to 156 pence after the firm announced the deal. The stock has been highly volatile since the Gotham City Research report. Also PricewaterhouseCoopers said the company’s method of recording revenue was just barely acceptable. The accounting firm specifically said the way Quindell recorded revenue from hearing loss claims in 2014 wasn’t appropriate.
Then in January, it was reported by FactSet that billionaire George Soros had a 5.1% stake and shares surged as a result. However, they plunged when it was realized that it was a mistake and Soros actually didn’t have a stake in Quindell.