RSA needs £8 billion to buy out Aviva, warns UBS

RSA Insurance, who recently made news by offering £5 billion for personal and business insurance provider Avica’s general insurance division, has recently been told they’ll need to set their bar a little higher for the buy-out, said an analyst from UBS.

Determining that Aviva’s Canadian, Iriish, and British property and casualty operations were to be valued much higher than previously thought, UBS suggested in a recent statement that RSA would need to offer well and above £8 billion in order to make the general insurance division spin-off more palatable to  investors of both of the general and professional liability insurance giants.  In comparison to other valuations made recently, it exceeds the £5.8 billion that Merrill Lynch was given by nearly 39 per cent, to say nothing of the 60 per cent increase over RSA’s most recent £5 billion offer that had been made to Aviva.

A statement released by a UBS staffer who was a member of its specailised sales team declared that the buyout by RSA was an extremely unlikely occurrence because of Aviva’s deep dependency on the general insurance business it conducts in order to procure high levels of profits and cash flow.

The recent statement highlights the current struggle between RSA and Aviva as they battle for the hearts and minds of a select group of investors who hold key shares in both companies.

Both Aviva and RSA, companies listed on the FTSE 100, share such asset managers as Legal & General, BlackRock, and Scottish WIdows Investment Partnership, and efforts have been made by both professional indemnity insurance providers to influence these groups of shareholders.  Andy Moss, chief executive for Aviva, has been encouraging shareholders to consider the benefits of keeping insurance business units under one umbrella company, while RSA boss Andy Haste has been bringing attention to Aviva’s tepid performance on the stock markets in an effort to develop feelings of discontent in those same shareholders.

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