RSA is on the verge of being broken up after the board of the 300-year-old insurer told shareholders to accept a £7.2bn takeover offer from foreign bidders.
The FTSE 100 company confirmed it had received a cash offer of 685p per share from the Canadian and Danish consortium, plus payment of a previously announced 8p per share dividend - making the deal the biggest buyout of a London-listed company this year.
Activist investor Cevian Capital, RSA’s largest shareholder with a 14.9pc stake, has already committed to voting in favour of the transaction. The firm, chaired in the UK by former City minister Lord Myners, will net close to £1.1bn if it goes through.
The deal, which is expected to complete in the second quarter of 2021, represents a 51pc premium to RSA’s share price before details of the offer first leaked earlier this month.
RSA, which owns car insurer More Than and also underwrites home and pet insurance for Tesco and John Lewis, recommended that shareholders accept the offer from Canadian insurer Intact Financial and Danish rival Tryg.
Intact will take over RSA’s business in the UK where it does not have any presence. It will also acquire the Canadian operations and the international arm, which includes divisions in Ireland and the Middle East.
The Scandinavian arm will be spun out and Tryg will assume control of the Swedish and Norwegian businesses while the bidders will take equal shares in the Danish operation.
Intact will pay £3bn and Danish insurer Tryg £4.2bn. The pair are financing the deal through a combination of debt and equity.
Intact has agreed to provide a guarantee for RSA’s pension liabilities, which was one of the potential sticking points for a deal. It will pay £75m into the firm’s pension schemes, and ongoing payments of £75m to plug the scheme’s funding deficit are set to continue.
Stephen Hester, RSA’s chief executive, said he will leave the firm once the deal has completed. He did not rule out taking another executive role elsewhere.
The former RBS boss stands to receive up to £15.9m from payouts for shares that he owns outright and has coming his way under bonus schemes if targets are hit.
He said the deal brought “mixture of sadness and of pride” given it will mark the “end of a chapter” for the insurer that traces its roots back to the Sun Fire Office set up in 1710 to protect livelihoods after the Great Fire of London. Mr Hester said the deal is was happening from “a position of strength” after a turnaround since he joined in 2014.
Intact said it expected to cut about 2pc of its expanded global workforce, or 520 jobs. About a third of these will be in the UK, home to RSA's 150-strong global head office. Mr Hester said the UK job losses would likely be outweighed by future growth.
Morten Hübbe, Tryg’s chief executive, said he was likely to cut up to 400 jobs in Norway and Sweden in the three years following the acquisition. A further 80 jobs will go in Denmark.
RSA has about 13,500 employees worldwide and has some 9m customers in 100-plus countries.
The sale is subject to approval of RSA shareholders and competition clearance in Canada, Denmark, Sweden and Norway.
Chairman Martin Scicluna said the offer offered "attractive, certain value" for shareholders and "reflects the strength and performance of RSA during a challenging period for our industry".
RSA shares rose 4.2pc to 674p.