RSA Makes 5 Billion Offer to Aviva

Aviva shareholders want talks to open with RSA.

Aviva shareholders want talks to open with RSA.

Shareholders of Aviva are wondering why they were not notified when an offer was made in a letter from RSA.  Though analysts say RSA undervalued Aviva in their offer, shareholders voice they should have been made aware of the offer.  There is now pressure mounting on Aviva’s board to open talks with RSA.

RSA chairman, John Napier, made a 5 billion pound offer in a letter to Aviva chairman, Lord Sharman of Redlynch last month.  The deal would double the size of RSA.  They believe that they can extract about 300 million in cost synergies by combining the efforts of both company’s general insurance business.  While the offer was dismissed by Aviva’s management team, RSA may come back with another offer.

When news of the offer was revealed Aviva shares increased 5.5 per cent at 387.5p on Friday, while RSA was down 1.1p at 127.4p.  There was no announcement of a stock exchange since the offer from RSA was for part of the company and not the whole.

Aviva is the UK’s general insurance market leader with an estimated 13 per cent share.  RSA has 6.6 of the general insurance market.  It is also strong in commercial, home, motor and pet insurance.

While management, analysts, and shareholders believe RSA’s offer was too low, they also believe a higher offer would be seriously considered.  Analysts at investment bank Merrill Lynch suggested that 6 billion pounds was a closer value.

Jane Coffey of Royal London Asset Management, which holds Aviva shares, said: “There’s a price for everything and if Aviva could be broken up at a much higher price, we’re not saying we wouldn’t want that.”

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