RSA Accepts $9.6 Billion Bid in Year’s Biggest U.K. Takeover

(Bloomberg) -- RSA Insurance Group Plc accepted a 7.2 billion-pound ($9.6 billion) takeover offer from Canada’s Intact Financial Corp. and Danish insurer Tryg A/S, the biggest acquisition of a U.K.-listed company this year.

The bid is about 50% more than the share price on Nov. 4, the last business day before Bloomberg News reported the takeover talks. That’s the highest premium paid in a European insurance deal for a decade, RSA Chief Executive Officer Stephen Hester said on a call with journalists after the announcement on Wednesday.

For Hester, who said he’ll leave RSA when the takeover is completed and the company is split up, the deal would culminate a program of cutting costs and selling assets since he joined in 2014 in what observers saw as preparation for a potential sale. Activist investor Cevian Capital, RSA’s largest shareholder, said Hester had brought about a “strategic and operational transformation” of the company.

“RSA has become more focused and profitable while its risk level and volatility have been reduced,” Cevian said in an emailed statement on Wednesday. “This has enabled RSA to participate in the ongoing global consolidation of the property and casualty insurance industry from a position of strength.”

Insurers have been seeking to gain scale as they grapple with the impact of low interest rates and the coronavirus pandemic. The purchase of RSA would be the biggest takeover of an insurer announced this year, surpassing KKR & Co.’s acquisition of the former life insurance arm of Goldman Sachs Group Inc. for more than $4 billion.

If the deal wins approval from shareholders and regulators, it would also provide Hester with a windfall. His stake of just over 1 million shares would be worth about 7 million pounds at the sale price of 685 pence per share.

RSA shares rose as much as 4% in London trading on Wednesday morning, taking their gain this year to about 19%.

Hester said RSA’s transformation over the past six years, including record underwriting profits in three of the last four years, helped it secure a high sale price. It has also posted strong profits in the face of difficult markets, and has restructured its management team, he said.

RSA is set to be broken up under the plan, with Intact keeping its Canadian and U.K. and international operations. Tryg would take the Swedish and Norwegian operations, which will help make it Scandinavia’s biggest listed property and casualty insurer. RSA’s Danish business would be jointly owned by the two firms. Tryg will pay about 4.2 billion pounds and Intact will pay about 3 billion pounds.

A small number of jobs are expected to go at RSA’s corporate headquarters in London as well as a likely modest number of roles in Canada and Scandinavia, Hester said.

RSA, which traces its roots back to 1706, offers a range of general and specialty insurance products and has long been viewed as a possible takeover target. In 2015, Zurich Insurance Group AG abandoned a 5.6 billion-pound offer for RSA after an explosion at a Chinese port triggered losses in its own business.

Under the terms of the agreement, RSA shareholders will still receive a planned divided of 8 pence per share that will be paid in December.

©2020 Bloomberg L.P.