RSA, one of the UK’s oldest financial services firms, would be carved up under plans developed by the bidders readying a £7.2bn takeover offer for the insurer.
The FTSE 100 firm revealed on Thursday that it had received a potential 685p-per-share cash offer, a premium of more than 50pc of its share price before the deal was announced.
RSA, which also owns the More Than brand, said combining its businesses with Canadian insurer Intact Financial and Danish rival Tryg was “strategically compelling” and would result in a stronger foothold in both Canada and Scandinavia.
The proposal, first made to RSA’s board on Oct 2, would result in the company being split in three.
Intact, a Toronto-listed property and casualty insurer, would pay £4.2bn and take control of RSA’s Canadian division as well as its UK and international arm, which includes operations in Ireland, Europe and the Middle East.
Tryg, which is listed in Copenhagen, would stump up the remaining £3bn to buy the Swedish and Norwegian business, which it said would result in a “step change” in its profitability in the region and improve its geographical and product diversity. It expects cost savings of 900m kroner (£108m) from the deal.
Tryg and Intact intend to jointly own RSA’s business in Denmark.
Analysts at Jefferies said the offer was “more than fair value” for RSA shareholders. A deal could boost Intact’s market share in Canada from 17pc to 23pc and make Tryg one of Sweden and Norway’s top three insurers, but was unlikely to raise competition concerns, they added.
“Looking at the details, it seems unlikely that another consortium could match this, though such a complex transaction may take time to complete,” they said.
The risk of regulatory intervention to block the deal is minimal because there is strong competition among insurers in all of the affected markets, the Jefferies analysts added.
Negotiations were at an advanced stage and relations between the parties were friendly, a person close to the talks said.
The proposed bid is subject to due diligence, which is already underway, and the consent of RSA’s pension fund trustees.
Under takeover rules, Intact and Tryg now have until Dec 3 to make a firm offer to RSA, which the board would then have to put to a shareholder vote. RSA said its board was minded to recommend the offer if it is made concrete.
Shares slipped 1.5pc to 660p in early trading on Friday, still more than 200p higher than before the potential bid was announced.