Zurich Insurance Group AG has arranged 5.5 billion pounds ($8.4 billion) in financing for the takeover of smaller rival RSA Insurance Group plc, according to people with knowledge of the plan, signaling the Swiss insurer is getting closer to proceeding with a formal offer.
Zurich has arranged the loans through Morgan Stanley, Citigroup Inc., HSBC Holdings plc, Deutsche Bank AG, UBS Group AG and Lloyds Banking Group plc, the people said, asking not to be identified as the information is private. The company is still doing a due diligence process before making a formal offer for RSA, they said. The financing is a bridge facility, meaning Zurich would need to repay it probably by selling securities if the bid goes ahead, according to the people.
Zurich last month made a takeover proposal that would value RSA at about 5.6 billion pounds. That would make it the biggest acquisition in the industry in Europe this year. RSA is still trading below Zurich’s tentative offer of 550 pence a share, signaling investors may be concerned about the deal closing at that price.
RSA shares rose as much as 1.6 percent and were up 1 percent at 503.50 pence at 2:02 p.m. in London on Monday. They have increased about 16 percent this year, valuing the company at 5.1 billion pounds. U.K. regulators have given Zurich until Sept. 22 to make a firm offer.
RSA said last month that Zurich raised its bid, without saying what the previous offer was. It had earlier offered about 525 pence while RSA was demanding at least 600 pence a share, the Sunday Telegraph reported Aug. 5. A deal would include Zurich honoring an interim dividend of 3.5 pence a share announced last month, according to RSA.
A deal would be Zurich’s largest since 2000 and help Chief Executive Officer Martin Senn expand in the UK and Latin America. It would also bring access to RSA’s profitable Scandinavian and Canadian units. The company has a market value of about 39 billion Swiss francs ($40 billion).
Officials for Zurich, RSA, Morgan Stanley and Deutsche Bank declined to comment. Spokesmen for Citigroup, HSBC, UBS and Lloyds didn’t immediately respond to e-mails seeking comment.
–With assistance from Richard Partington and Sarah Jones in London and Jeffrey Vögeli in Zurich.
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