* Intact to keep Canada and UK, Tryg to take Norway, Sweden
* Offer made Oct 2 at 50% premium to share price
* RSA board minded to accept
(Adds detail on valuation, financing)
By Carolyn Cohn and Pamela Barbaglia
LONDON, Nov 5 (Reuters) - RSA is in talks with a
consortium of Canadian insurer Intact Financial and
Danish insurer Tryg about a possible break-up deal
that values the British firm at about 7.2 billion pounds ($9.46
billion).
RSA said its board would be minded to recommend the proposal
for 685 pence in cash per RSA share, plus the payment by RSA of
its previously announced interim dividend of 8 pence per share.
The offer was made on Oct. 2 and represents a 50% premium to
RSA's closing price on Oct. 1.
If successful, the deal would allow Intact to boost its
presence in the competitive Canadian property and casualty (P&C)
industry while Tryg would create the largest listed P&C insurer
in Scandinavia with total assets of about 99 billion Danish
crowns.
Shares in RSA shot up 46% to close at 670 pence on Thursday.
Jefferies analysts said the offer price represented "more
than fair value".
Best known in Britain for its More Than brand, RSA provides
home, motor and commercial insurance and has large operations in
Canada, Ireland and Scandinavia.
Under terms of the deal, Intact and Tryg would split up the
business with the Canadian firm keeping RSA's Canada and UK and
international operations, while Tryg would take control of RSA's
Sweden and Norway business. The pair would also co-own RSA's
Danish unit.
Tryg, which is advised by Morgan Stanley, would take on the
highest bill, paying RSA about 4.2 billion pounds and launching
a rights issue in 2021 to finance the deal.
Intact, advised by Barclays, would contribute 3 billion
pounds to the transaction which it plans to fund through an
equity private placement - mainly backed by cornerstone
investors - as well as debt and preferred share issuances.
The two insurers are currently carrying out due diligence on
RSA and have until Dec. 3 to make a firm offer.
RSA has hired Robey Warshaw, Goldman Sachs and Bank of
America to advise on the deal which comes five years after a
previous attempt to merge with Zurich Insurance fell
through in 2015.
Both Intact and Tryg have been mooted as potential bidders
since then, with former Tryg CFO Christian Baltzer taking the
helm of RSA's Danish business last year.
RSA Chief Executive Stephen Hester, a former boss of NatWest
who joined RSA in 2014, shored up the company's balance sheet
with a 773 million pound rights issue and scaled back
underperforming business.
Rising commercial insurance rates, lower non-pandemic
related claims and a tightening up of its underwriting strategy
boosted RSA's underwriting profit in the first nine months of
2020, despite the impact of COVID-19, it said earlier.
RSA's combined ratio, a measure of performance in which a
level below 100% indicates a profit, stood at 90% in the third
quarter, compared with 93.6% at the end of 2019.
The insurer said it was revising down its initial estimate
of the gross impact of a September judgment in a UK test case
brought by the British markets regulator around the payment of
business interruption insurance by around 20 million pounds.
($1 = 0.7613 pounds)
(Reporting by Carolyn Cohn and Pamela Barbaglia; editing by
Mark Potter, Elaine Hardcastle and Tom Brown)
