Zurich: Zurich Insurance Group AG, Switzerland’s largest insurer, proposed to buy the UK’s RSA Insurance Group Plc for about £5.6 billion ($8.8 billion).
RSA is willing to recommend the possible offer of 550 pence a share to its shareholders provided satisfactory terms are met, including due diligence, it said in a statement from London on Tuesday. UK regulators have given Zurich until September 22 to make a firm offer.
The decision ends a month of speculation about whether Zurich Insurance Chief Executive Officer Martin Senn would bid for the company and comes on the day of a deadline to submit an offer. The possible takeover, which would be the biggest in Europe this year, has spurred speculation that buyouts in the European insurance industry, which have lagged behind those in the US, are about to gain momentum.
“We think this is a reasonable price,” said Ming Zhu, an analyst at Canaccord Genuity in London. “RSA made some strong progress in the first half of 2015. That provides some comfort to Zurich shareholders.”
RSA rose 0.8 pence to 495 pence in London trading Monday, valuing the company at £5 billion (Dh28.8 billion). The shares had risen to as high as 528 pence on August 4 on speculation a deal would be signed.
The two firms had differed on price, with RSA demanding 600 pence a share and Zurich offering about 525 pence, according to reports in the UK press including the Sunday Telegraph.
Zurich’s purchase of RSA would allow it to expand in the UK and Latin America as well as access RSA’s profitable Scandinavian and Canadian units at a time when its own profit is in decline.
For RSA, the talks are capping a tumultuous two-year period which included an accounting scandal in Ireland, Simon Lee’s departure as CEO and a spate of asset disposals to shore up the balance sheet. Stephen Hester, the former CEO of Royal Bank of Scotland Group Plc, took the reins last year.
—Bloomberg
