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Canada's Intact, Denmark's Tryg agree to buy British insurer RSA for $9.6 billion

LONDON (Reuters) - Canada's Intact Financial IFC.TO and Denmark's Tryg TRYG.CO on Wednesday said they had reached an agreement to buy British insurance group RSA RSA.L for 7.2 billion pounds ($9.6 billion) in cash in one of Europe's biggest financial takeovers this year.

FILE PHOTO: The logo of British insurance group RSA outside its London offices, December 13, 2013. REUTERS/Toby Melville/File Photo

Insurers have become an attractive proposition since the coronavirus crisis despite reputational damage from disputes over business interruption claims, industry sources say. Home-working has led to fewer claims on home and motor insurance while commercial insurance rates have risen sharply.

RSA’s directors backed the Intact-Tryg bid unanimously and recommended shareholders vote in favour of the consortium’s offer, the company said on Wednesday, having first flagged the approach early this month.

Best known in Britain for its More Than brand, RSA provides home, motor and commercial insurance and also has large operations in Canada, Ireland and Scandinavia.

RSA Chief Executive Stephen Hester told reporters he planned to step down after the deal’s completion.

The deal “represents an excellent outcome for all of our constituencies”, Hester said.

The former NatWest NWG.L boss, who has shored up RSA's balance sheet with a 773 million pound rights issue and scaled back underperforming operations since joining in 2014, said he expects the deal to complete in the second quarter of 2021 but has no plans for the future as yet.

The proposed takeover would result in the break-up of the British group. Intact would gain RSA’s Canada, UK and international operations while Tryg would take the Sweden and Norway businesses. The pair would co-own RSA’s Danish unit.

Intact CEO Charles Brindamour told reporters his company would invest in RSA’s UK operations and that job losses in the UK and Canada would be capped at 2%.

His Tryg counterpart Morten Hubbe also told reporters job losses in Scandinavia would be relatively low, describing RSA’s businesses there as “high quality”.

UK INVESTMENT

Tryg would pay 4.2 billion pounds while Intact would contribute 3 billion pounds, with the overall offer representing a 51% premium to RSA’s Nov. 4 closing share price of 460 pence.

Canadian pension funds Caisse de dépôt et placement du Québec, Canada Pension Plan Investment Board and Ontario Teachers' Pension Plan Board will contribute C$1.5 billion, C$1.2 billion and C$500 million respectively to Intact's payment, the company said in a statement here last week.

KBW analysts called the deal “transformational” for Tryg.

Activist investor Cevian Capital, RSA’s largest shareholder with a 14.9% stake, said it fully supports the takeover.

Industry sources said RSA had been seeking a buyer since a 5.6 billion pound bid from Zurich Insurance ZURN.S collapsed in 2015. Any buyer of the UK business also needed to win over the trustees of its UK pension schemes, they said.

Intact will put extra cash into those schemes, RSA’s statement said.

The appetite for insurance deals has been growing. In August motor insurer Hastings HSTG.L agreed to be bought by Finland's Sampo SAMPO.HE and South Africa's Rand Merchant Investment RMIJ.J.

Intact shares rose 0.6% to C$676.80 in afternoon trading in Toronto. RSA shares closed up 4.7% in London, while Tryg ended the day down 5.1% in Copenhagen.

Morgan Stanley MS.N advised Tryg and Barclays BARC.L advised Intact. Goldman Sachs GS.N, Robey Warshaw and BofA Securities advised RSA.

Additional reporting by Nikolaj Skydsgaard in Copenhagen and Nichola Saminather in Toronto; Editing by Sinead Cruise and David Goodman

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