RSA Insurance has approved a £5.6bn bid by its rival Zurich in the biggest European takeover so far this year.
The 300-year-old insurer said it was “willing to recommend” Zurich’s revised offer of 550p a share and has asked the Takeover Panel to extend yesterday’s “put up or shut up” deadline for another month to allow final details to be thrashed out.
The takeover is a coup for RSA chief executive Stephen Hester, the former boss of Royal Bank of Scotland, and the insurer’s chairman Martin Scicluna, who recruited Mr Hester in February last year after RSA’s share price was smashed by a £200m accounting scandal in its Irish business.
Talks between Messrs Scicluna and Hester and their counterparts at Zurich – chairman Tom de Swaan and chief executive Martin Senn – are understood to have intensified in the past two weeks, culminating in yesterday’s offer.
Both sides indicated that the recent turmoil in world stock markets had not affected discussions over the price, with each saying that Zurich was paying for the long-term value of RSA. But Zurich must reassure its shareholders that it is not overpaying for expansion.
RSA investors have been promised that they will receive the 3.5p interim dividend RSA declared earlier this month, even if a deal is completed before it is due to be paid.
Eamonn Flanagan, an insurance analyst at Shore Capital, said the deal now seemed “inevitable”. But he also held out the faint hope that there could still be a counterbid from “another continental European insurer”.
The market appeared to take a less optimistic view, marking RSA shares – the only riser on the FTSE 100 yesterday – up just 19.5p, or 3.9 per cent, at 514.5p That’s 39p below the combined bid offer and dividend value.
Speculation is already rife on what Mr Hester might do next, with the vacant chief executive’s seat at Barclays widely mentioned. He is unlikely to stay on at RSA once the takeover is complete.
He was paid £2.2m by RSA last year, and although he only owns 21,500 shares directly, he has also been awarded 1,254,633 million performance shares, worth just under £7m. These shares should largely vest after the takeover.
Since taking charge, when RSA’s market value was just £3.6bn, Mr Hester has cut more than 3,000 jobs, bringing the workforce down to 18,500. He launched a £1.7bn rights issue shortly after his arrival and has sold several non-core businesses, raising £835m.
