One of Britain’s oldest insurance firms could fall into foreign ownership after attracting a £7.1bn takeover offer from Canadian and Scandinavian rivals
Michael O'Dwyer
Thu, 5 November 2020
RSA logo
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Personal and commercial insurer RSA said it has received a potential 685p-per-share cash offer and that its board is minded to accept, sending the stock rocketing 45.8pc.
The FTSE 100 firm said it had been approached by Danish insurer Tryg and Canadian property and casualty insurance business Intact Financial Corporation, acting in partnership.
RSA - which underwrites home and pet insurance offered by the likes of John Lewis, Tesco and Argos - traces its roots back more than three centuries to the original Sun Insurance company set up in 1706 by entrepreneur Charles Povey to protect livelihoods after the Great Fire of London.
The consortium made its approach on Oct 2 but has not tabled a formal bid. Shares leapt to 670p having traded at just above 450p late on Thursday afternoon.
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Personal and commercial insurer RSA said it has received a potential 685p-per-share cash offer and that its board is minded to accept, sending the stock rocketing 45.8pc.
The FTSE 100 firm said it had been approached by Danish insurer Tryg and Canadian property and casualty insurance business Intact Financial Corporation, acting in partnership.
RSA - which underwrites home and pet insurance offered by the likes of John Lewis, Tesco and Argos - traces its roots back more than three centuries to the original Sun Insurance company set up in 1706 by entrepreneur Charles Povey to protect livelihoods after the Great Fire of London.
The consortium made its approach on Oct 2 but has not tabled a formal bid. Shares leapt to 670p having traded at just above 450p late on Thursday afternoon.
Markets Hub - RSA Insurance Group
The proposed cash offer would hand RSA shareholders 685p per share plus a previously announced 8p per share interim dividend.
Boss Stephen Hester - the former chief executive of bailed-out lender Natwest - would land up to £15.9m from payouts for shares which he owns outright and has coming his way under various bonus schemes if targets are hit.
There is no certainty that the consortium will make a formal bid and any offer would be subject to conditions including a period of due diligence, RSA said as it confirmed the talks following a report by Bloomberg.
The announcement raised the prospect that the company could be split up.
Intact, which has a market value of £12.2bn, intends to retain RSA’s Candian division and its UK and international unit.
Copenhagen-listed Tryg, which is worth £6.8bn, would take over the Swedish and Norwegian operations.
The pair would jointly own RSA’s Danish business, which is being restructured by Tryg's former finance chief.
Philip Kett, an analyst at Jefferies, said that a 685p offer “would represent more than fair value for RSA”. Rival insurer Zurich aborted a £5.6bn bid for the firm in 2015.
The approach was revealed just hours after RSA disclosed that a fall in claims from customers staying at home during the pandemic helped to offset a slump in sales in the third quarter.
Group business operating profit increased in the first nine months of the year helped by strong underwriting, the firm said.
The company sold £4.7bn worth of insurance in the first nine months of the year, 3pc lower than a year ago. It blamed the fall on Covid-19.
The proposed cash offer would hand RSA shareholders 685p per share plus a previously announced 8p per share interim dividend.
Boss Stephen Hester - the former chief executive of bailed-out lender Natwest - would land up to £15.9m from payouts for shares which he owns outright and has coming his way under various bonus schemes if targets are hit.
There is no certainty that the consortium will make a formal bid and any offer would be subject to conditions including a period of due diligence, RSA said as it confirmed the talks following a report by Bloomberg.
The announcement raised the prospect that the company could be split up.
Intact, which has a market value of £12.2bn, intends to retain RSA’s Candian division and its UK and international unit.
Copenhagen-listed Tryg, which is worth £6.8bn, would take over the Swedish and Norwegian operations.
The pair would jointly own RSA’s Danish business, which is being restructured by Tryg's former finance chief.
Philip Kett, an analyst at Jefferies, said that a 685p offer “would represent more than fair value for RSA”. Rival insurer Zurich aborted a £5.6bn bid for the firm in 2015.
The approach was revealed just hours after RSA disclosed that a fall in claims from customers staying at home during the pandemic helped to offset a slump in sales in the third quarter.
Group business operating profit increased in the first nine months of the year helped by strong underwriting, the firm said.
The company sold £4.7bn worth of insurance in the first nine months of the year, 3pc lower than a year ago. It blamed the fall on Covid-19.
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