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UPDATE 3-Sampo, RMI scoop up UK insurer Hastings in $2.2 bln cash deal

Wed, 5th Aug 2020 07:56

* Sampo, RMI to buy Hastings for 250p a share

* Hastings shares surge 18% to top FTSE 250 gainers

* Deal values Hastings at 1.66 billion pounds
(Adds Hastings, Sampo CEO comments)

By Anne Kauranen and Muvija M

HELSINKI, Aug 5 (Reuters) - British motor insurer Hastings
has agreed to be bought by Finland's Sampo
and South Africa's Rand Merchant Investment (RMI) in a
cash deal valuing it at 1.66 billion pounds ($2.2 billion), the
insurers said on Wednesday.

The recommended offer gives 250 pence a share to Hastings'
investors plus an interim dividend of 4.5p a share, a higher
premium than expected after the companies said last week they
were in talks.

Hastings shares, which had already soared 27% since the
talks were disclosed, were up another 18% at 253p by 1242 GMT,
topping the FTSE 250 midcap gainers and scaling a near two-year
high.

RMI dipped 1%, while Sampo stock was down 4.1% due to the
47.1% premium paid over Hastings' July 28 closing share price,
which Reuters Breakingviews said looked chunky given few cost
savings on offer.

Sampo has been looking to expand into non-life insurance and
beyond Nordic markets. It trimmed its stake in regional bank
Nordea last year, freeing up 1.2 billion euros ($1.4
billion), which will help finance the Hastings investment.

With nearly 3 million live customer policies and an 8.1%
share of the highly-competitive UK motor insurance market,
Hastings aims to be one of the country's top motor insurers
alongside the likes of Direct Line and Admiral
, Hastings boss Toby van der Meer told Reuters.

Sampo CEO Torbjorn Magnusson added that there were also
opportunities for Hastings to expand beyond motor insurance.

"The digital distribution part of the UK market is still
growing and Hastings has not yet to any significant degree grown
in home insurance," he said.

Analysts at KBW said the appeal of Hastings lay in its
knowledge of pricing systems for motor insurance policies.

"(The) driving force behind the acquisition is the potential
upside coming from the technological know-how the UK insurer can
bring to the table," they said.

Once the deal goes through, Sampo will hold 70% of Hastings,
while Main Street, an entity owned by RMI and its unit
OUTsurance, will hold a 30% stake, a marginal increase on RMI's
29.7% stake in Hastings it has owned since 2017.

Van der Meer added that Hastings will be run as a
privately-held independent company, separate from Sampo and RMI.

When questioned about any potential changes to top
management, he said: "I don't think so."

Hastings also reported a 31% jump in first-half adjusted
operating profit to 78.3 million pounds, driven by strong policy
growth and a fall in motor claims as Britons drove less due to
coronavirus restrictions.

That chimes with results from Direct Line earlier
this week, when the company hiked its interim payout and set a
special dividend.

J.P. Morgan Cazenove is acting as financial adviser for
Sampo and RMI, while Barclays, Fenchurch and Numis advised
Hastings.

($1 = 0.8468 euros)
($1 = 0.7646 pounds)

(Reporting by Anne Kauranen, Muvija M and Carolyn Cohn
Editing by David Holmes and Kirsten Donovan)

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