UK insurer RSA said it is in talks to sell itself to a consortium in a £7.2bn deal that would break-up the 300-year-old group.
Canada’s Intact Financial and Denmark’s Tryg have proposed paying 685p per share for RSA, the UK insurer said in a statement on Thursday. That is a 48 per cent premium to where the stock was before trading opened on Thursday.
If the bid is successful, Intact will take control of RSA’s UK and Canadian businesses for £3bn, while Tryg would acquire the operations in Sweden and Norway for about £4.2bn. The two groups would co-own RSA’s Danish business.
RSA said it received the proposed offer on October 2 and has entered into discussions with the bidders.
“The board of RSA has indicated to the consortium that it would be minded to recommend the proposal, subject to satisfactory resolution of the other terms of the possible offer, including a period of due diligence,” the UK insurer said.
RSA, which employs 12,400 people, has been run by former RBS chief executive Stephen Hester since 2014, when he joined after the company discovered problems in its Irish business. He shored up the balance sheet with a £773m rights issue and sold some of its international businesses.
There was another hiccup in 2018 when the company had problems in its London-based commercial insurance operation. Since then it has exited several lines of business.
RSA has long been seen as a takeover target, having been close to agreeing a sale to Switzerland’s Zurich Insurance in 2015. More recently, it has been linked with Aviva, which also has a big presence in the UK and Canada.
The speculation over its future had been building as analysts debated how much longer Mr Hester would stay at the company. Some in the insurance industry have considered Scott Egan, head of RSA’s UK business, as a potential successor to Mr Hester.
“It’s difficult to see another bidder emerging at this point. A rival consortium bid possibly involving Aviva and Sampo could have made some sense but neither company is in a position to do so right now,” said James Shuck, an analyst at Citigroup.
“Any rival bidder would find it very difficult to match the offer price given the size of the synergies that would be available to the existing consortium,” he added.
Shares in the London-listed company surged to close at 670p on Thursday after Bloomberg first reported on the interest from Intact and Tryg. Under UK takeover code guidelines, the bidders have until 5pm on December 3 to make a firm offer.
If it is swallowed up, RSA would become the latest UK insurer to be bought by an overseas rival. In August, Hastings accepted a £1.7bn bid from Finnish insurer Sampo and South Africa’s Rand Merchant. Germany’s Allianz bought general insurance businesses from LV and Legal & General.
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