RSA chief executive Stephen Hester is in line to scoop more than £8.5 million (€11.6m) after eliciting a £5.6 billion bid proposal for the group from larger rival Zurich, in what is shaping up to be the largest takeover of a UK insurance company in 15 years.
The more than 300-year-old FTSE 100 insurer, led for the past 18 months by the former Royal Bank of Scotland chief, said it was “willing to recommend” an all-cash bid from its Swiss suitor.
It was the latest sign that a dealmaking wave in the industry is gathering momentum, and paves the way for the creation of a new force in European insurance.
Yet Zurich is already facing questions from some shareholders about the proposed deal, its largest since chief executive Martin Senn took the helm five years ago.
Leak
Zurich’s proposal is pitched at a premium of about a quarter to RSA’s market value four weeks ago, before a leak forced the Swiss group to reveal its interest.
“As a Zurich shareholder I am not sure why they are buying RSA and at this price,” said Andrea Williams, senior equities fund manager at Royal London.
However, the Swiss group insisted it will not overpay for RSA, which it says will be “complementary” with its existing businesses.
The takeover is likely to lead to job cuts among RSA’s 19,000-strong global workforce. Analysts have warned that Zurich will need to find hundreds of millions of pounds’ worth of savings to justify the deal.
That would probably involve particular cuts in the UK, RSA’s biggest market, where the takeover target employs about 7,000 people and sells home, motor and pet cover under the More Than brand.
Shares in RSA rose 3.9 per cent yesterday to 515p – short of the mooted offer price, suggesting that some dealers are cautious about the prospect of the deal being sealed.
The transaction remains subject to due diligence, among other potential stumbling blocks.
It comes less than two years after Mr Hester was hired to lead a revival of RSA, battered by a series of profit warnings and an accounting scandal at its Ireland business before he joined.
Zurich shares rose 2.5 per cent to SFr267.4.
Copyright The Financial Times Limited 2015
