R&SA Sells U.S. Business to Arrowpoint Capital; Terminates Stock Listing

September 28, 2006

The U.K.-based Royal & Sun Alliance Insurance Group plc (R&SA) announced the sale of its US operation to Arrowpoint Capital, a vehicle set up by the current R&SA US management team.

The Company also said it is in the process of terminating its U.S. securities activities. This involves “the termination of its American Depositary Receipt (ADR) program, its voluntary delisting from the New York Stock Exchange (NYSE) and action to terminate its US Securities and Exchange Commission (SEC) registration,” said the bulletin.

R&SA has been in the process of restructuring its U.S. operations since 2003, when it announced that they were no longer “core operations” (See IJ Website Sept. 26, 2003). It sold Viking Insurance, its specialty U.S. non-standard auto business, to Sentry Insurance last year (See IJ Website July 29, 2005), and has been closing operations and putting many of its lines into run-off.

Its ultimate goal has been to exit the U.S. market and to concentrate on Europe and Asia. “In the last three years the Group has taken significant action to deliver this objective,” said the announcement.

R&SA is now selling its US operation to Arrowpoint Capital for a deferred consideration of £158 million ($297 million), “which,” it said, “will be funded from the future performance of the US operation. The transaction is conditional upon, inter alia, shareholder and regulatory approvals.

“On receipt of these approvals and with completion of the transaction, the Group will make a £151 million ($287.5 million) capital contribution into the US regulated entities. The net capital contribution, write off of US net assets and other related costs will result in an estimated pre tax loss on disposal of £443 million ($832.75 million).

Andy Haste, Group CEO commented: “Today’s announcement is a significant step for the Group. The sale of the US operation is the right deal for our shareholders and US policyholders. The transaction will bring certainty and finality and delivers on our objective of a clean exit from the US.

Over the last three years we have dealt with a number of legacy issues and in the Core Group built a high quality business focused on driving profitable growth and continuous operational improvement. We remain confident of continuing to deliver sustainable profitable performance.”

Concerning the withdrawal from U.S. Securities markets, R&SA noted that it has been “listed on the NYSE and registered in the US under the US Securities Exchange Act 1934 since 1999, when the listing and registration were identified as an important milestone in the continued global development of the Group. The purpose of the listing was to give the Group access to one of the world’s largest capital markets and to provide the then large number of US employees with the opportunity to invest in the Group through ADRs.

“The strategic benefits to the Group of having a US listing and registration no longer apply. Following the capital actions taken by the Group since 2003, R&SA is no longer dependent upon a US listing for capital raising, and today announced the sale of its US operation; in addition the size of the ADR program is now at its lowest level since April 2004.

“Given these reasons, the Group believes that it is no longer cost effective nor in the best interests of R&SA to maintain the NYSE listing, the ADR program or its SEC registration. The Group estimates the ongoing costs of complying with SEC reporting and other requirements to be over £10 million [$18.8 million] per annum.”

The bulletin also explained the details of the delisting process, noting that R&SA expects to be able to complete them and terminate its obligations by the end of October.

The full bulletin may be obtained on the Group’s Website at http://www.royalsunalliance.com. R&SA also hosted a press conference today, which is available on the Website.

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