US Buyer Swoops For Warranty Giant

A little-known American private equity group has tabled an offer to buy Domestic & General (D&G), one of Britain's biggest providers of warranties for domestic appliances.

Sky News understands that Stone Point Capital, a Connecticut-based firm which has around $9bn under management and which focuses on investments in the financial services industry, is among those vying to buy D&G.

D&G's current owner, Advent International, has put the company up for sale, and is understood to be hoping to achieve a sale price close to double the £524m it paid to buy the company in 2007.

Titans of the private equity industry such as Blackstone (NYSE: BX - news) , Clayton Dubilier & Rice and CVC Capital are also in contention to acquire D&G, insiders said on Monday.

D&G is one of the largest insurers in Britain and boasts that it has more than 4 million customers, covering more than 6 million appliances, such as refrigerators, ovens and central heating units. It has warranty partnerships with prominent brand manufacturers such as Electrolux (Other OTC: ELUXY - news) and Whirlpool (NYSE: WHR - news) .

The company was established in the unlikely surroundings of the Australian Outback in 1912, when founder Samuel Copley set up a company providing insurance cover for sheep and cattle transportation.

D&G later became the first company to offer protection for cathode ray tubes in early black-and-white television sets, and in 1978 began offering cover for central heating. The company listed on the London Stock Exchange (LSE: LSE.L - news) in 1988, and made nearly £73m in pre-tax profits in the year to March 31, 2012.

Insiders said that Advent was likely to pursue a sale of the company rather than opting for a stock market listing, although they insisted that it was "keeping an open" mind about its options. The resurgent equity markets have prompted many private equity firms to rethink plans to sell companies privately because of the comparable valuations they might achieve from a public listing.

Goldman Sachs (NYSE: GS-PB - news) , which is handling the sale, also advised Advent on its takeover of D&G. The buyout group is a seasoned investor in financial services, and its plan to sell D&G comes at a busy time for corporate activity in the insurance sector, with esure, the motor specialist, set to announce its intention to float next week.

D&G's business area has not been without controversy, with extended warranties a frequent target for the ire of consumer groups, which argue that they often provide cover of limited value for customers who can ill-afford it.

Homeserve (LSE: HSV.L - news) , a rival player which competed with Advent to buy D&G in 2007, saw its fortunes suffer after becoming embroiled in a mis-selling investigation last year.

Advent declined to comment on Monday.