Zurich has asked RSA Insurance Group for more time in order to table a formal offer, as the two insurers work towards a deal, rumoured to be worth around £5bn.
According to sources cited by FTAdviser sister title the Financial Times, RSA is likely to ask the takeover panel for an extension to tomorrow’s (25 August) deadline for Zurich to make a firm bid or withdraw for six months.
Shares in RSA opened this morning down at 478p - short of an acceptable price for shareholders, suggesting investors are sceptical that a deal will be done.
RSA has been holding out for a price as high as 600p a share. However, sources told the FT that its investors were also eager to ensure the opportunity does not slip away because of the takeover panel deadline.
However, Zurich is unlikely to budge from its required financial hurdles, including generating a return on equity of 10 per cent. Analysts have said this likely to prevent Zurich from offering more than 550p a share, depending on the scale of savings it can make.
Zurich is apparently calling for more information on matters ranging from RSA’s pension scheme liabilities, to the regulators’ view of its balance sheet under new capital requirements.
At the end of July the Swiss insurance group confirmed it was evaluating a possible offer for British group RSA in a stock exchange announcement.
In Zurich’s interim results statement, group chief executive Martin Senn noted: “We believe that a transaction could bring significant benefits to us and to our investors in terms of the complementary fit of RSA’s business with our own operations and in financial terms.
“But any capital deployment would need to meet the same hurdles that we apply to any other investment.”
peter.walker@ft.com
