British insurer RSA receives a 550 pence all-cash takeover proposal from rival Zurich Insurance, valuing the firm at 5.6 billion pounds $8.82 billion. As Grace Pascoe reports it paves the way for one of Europe's largest insurance deals.
Zurich Insurance has bid for Britain's Royal & Sun Alliance. The Swiss insurer has offered 5.6 billion pounds for their UK rival. Paving the way for one of Europe's biggest ever insurance deals. Jeremy Batstone-Carr is from Charles Stanley. (SOUNDBITE) (English) CHARLES STANLEY, CHIEF STRATEGIST, JEREMY BATSTONE-CARR, SAYING: "Royal Sun & Alliance operations in the UK and Ireland are performing moderately well but are perhaps regarded as somewhat sub-optimal and Latin America has been very difficult for Royal Sun Alliance. So I rather suspect that the prime motivation for Zurich has been to increase its global footprint in particular in Scandinavia." RSA, known for its "More Than" insurance brand, says it will recommend the proposal to its board. It gave Zurich another four weeks to come up with a firm takeover offer. (SOUNDBITE) (English) CHARLES STANLEY, CHIEF STRATEGIST, JEREMY BATSTONE-CARR, SAYING: "It is offering what we think is a pretty full price, 550p per share represents an exit price to tangible book of about 1.8 times a forward multiple of 17 times. We think Royal Sun Alliance shareholders would be very pleased with 550p per share although of course Zurich reserves the right to adjust that price in the light of market conditions between now and the 22nd of September." RSA's shares rose nearly 5 percent on the back of the bid. And although a counterbid is still possible, analysts expect the takeover to go ahead. Strong competition and low investment are both spurring insurance mergers. As well as the tighter capital regulations due to come into force in Europe in the new year.