Yahoo Finance RSA agrees £7.2bn takeover by two overseas insurers
RSA, the 300-year old insurer that owns the More Than brand, has agreed a £7.2bn takeover from two overseas insurers that will result in the breakup of one of the FTSE 100’s oldest companies.
The board of the London-headquartered company has accepted an all-cash offer from the Canadian insurer Intact Financial Corporation and the Scandinavian insurer Tryg.
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Under the terms of the deal, Tryg will pay £4.2bn and take over RSA’s Swedish and Norwegian businesses, and Intact will pay £3bn to buy RSA’s Canadian, UK and Ireland, and international operations. The two companies will co-own RSA’s Danish business. RSA shareholders will also receive an interim dividend of 8p per share, worth about £82m in total.
RSA’s Danish business will be managed by Intact while it explores strategic options for the business, including a sale or stock market floatation.
“The board of RSA is pleased to be recommending Intact and Tryg’s cash offer for the company, which delivers attractive, certain value for shareholders,” said Martin Scicluna, the chairman of RSA.
“RSA has provided peace of mind to individuals and protected businesses from risk for more than 300 years. However, I am confident that the values of our business, and not least our dedication to serving customers well, will be sustained as part of Intact and Tryg.”
RSA, which employs 12,400 people, has been run by the former RBS chief executive Stephen Hester since 2014, when he joined after the company discovered problems in its Irish business. Hester strengthened the balance sheet with a £773m rights issue and sold some of RSA’s international businesses.
Hester said he intends to step down on completion of the deal and expects a small number of job losses in the UK, less than 150, mostly at the company’s corporate headquarters. Intact expects to eliminate about 2% of positions across its entire business post-deal, about 520 roles, but says it also intends to create more than 300 jobs by bringing RSA’s claim management operation in-house.
“In this case given the strength of business and given we are not present in the UK the vast majority of employees will find a job in the Intact family,” said Charles Brindamour, the chief executive of Intact. “The majority of the overlap [with RSA] is in Canada, 75% of the overlap. I don’t expect any meaningful job losses in the UK.”
Tryg said the combination of RSA with its Swedish and Norwegian businesses would result in 10% of 15% of roles being cut, up to 400, over four years.
“We have an annual group [staff] turnover of 8% to 12%,” said Morten Hübbe, the chief executive of Tryg. “Over four years the natural annual turnover will be a big part of solving this. You can’t help some people being caught in the middle but you can handle it in a socially responsible way.”
Hester, 59, is in line for a payout of up to £16m from selling the 830,000 RSA shares he has built up in a personal capacity since joining in 2014, having elected never to sell any, as well as performance-related stock awards due over the next few years.
Last year Hester was paid a total remuneration package of just over £4m, including a base salary of just over £1m, bonus of £1.5m and £1.1m of awards under a long-term incentive scheme.
RSA was formed in 1996 through the merger of Sun Alliance with Royal Insurance. The original Sun Insurance company was founded in 1706 and its successors have provided home insurance to people such as the explorer Capt James Cook and Charles Darwin.
The company still offers personal and commercial insurance products, as well as the underwriting of home insurance for brands such as John Lewis and pet insurance for Argos and Tesco.
UK insurers have been the subject of increased takeover activity recently.
In August, Hastings accepted a £1.7bn bid from the Finnish insurer Sampo and South Africa’s Rand Merchant. Germany’s Allianz bought general insurance businesses from LV and Legal & General.
Intact, the largest provider of property and casualty insurance in Canada with more than 16,000 employees across its international business, said the RSA takeover marks its eighth deal since 2010.
Tryg is one of the biggest insurance companies in the Nordic region, with activities in Denmark, Norway and Sweden.
