RSA Insurance has accepted a provisional £5.6bn bid from its bigger rival Zurich, following a month of manoeuvring by the two companies.
Zurich had proposed paying 550p a share in cash for the 305-year-old company, and then RSA’s board said it would recommend an offer at that price to its shareholders once its books were inspected.
The proposed bid is about 26% more than RSA’s share price before Zurich revealed its interest, and 11% more than RSA’s 495p closing price on Monday. RSA shareholders would also receive the 3.5p-a-share interim dividend announced at RSA’s results on 6 August.
RSA said in a statement: “The board has indicated to Zurich that it would be willing to recommend an offer at the level of the possible offer to RSA shareholders subject to the satisfactory resolution of the other terms of the offer. Accordingly, the board is in discussions with Zurich in relation to these terms.”
Zurich announced in July that it was considering a bid for RSA, which is headed by Stephen Hester, the former chief executive of Royal Bank of Scotland. Hester was initially dismissive of Zurich’s interest, claiming that RSA had a strong future and warning the Swiss company not to try to buy it cheaply.
But the two sides’ advisers entered talks which became more serious last week as a deadline approached for Zurich to make a firm offer. Under City rules, Zurich was given until 5pmon Tuesday to lodge a bid or walk away for at least six months but RSA has asked the Takeover Panel for an extension until 22 September while details of the deal are agreed.
Hester was drafted in early last year to clear up the mess at RSA after an accounting scandal in Ireland revealed wider financial problems at the business. Announcing better than expected results for RSA earlier this month, he said the company was becoming more valuable and he was thought to be looking for closer to 600p a share from Zurich. Hester’s shares in RSA are worth £3.3m at the proposed offer price.
RSA started business in 1710 as the Sun Fire Office, which insured the house of Captain James Cook before he set out on his voyages in 1865. It also covered Down House, Charles Darwin’s home when he wrote On the Origin of the Species.
The company’s fortunes have oscillated in recent years. Royal & Sun Alliance, as it was then, nearly collapsed in 2003. After its fortunes revived, it then hit problems again in 2013 as it issued a string of profit warnings and admitted it was short of capital.
This article was written by Sean Farrell, for theguardian.com on Tuesday 25th August 2015 08.42 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010