UK insurer Hasting Group Holdings has agreed to a £1.66 billion (US$2.2 billion) cash acquisition by Finnish insurer Sampo and Rand Merchant Investment Holdings Ltd., a South African financial services investment company.
Hastings investors will receive 250 pence for each Hastings share, along with an interim dividend for the six-month period ended June 30, 2020 of 4.5 pence per share.
Following completion of the offer, Sampo and RMI will own and control 70% and 30% of the shares and votes in the jointly owned company, respectively. (RMI acquired approximately 30% of Hastings in 2017).
The size of Sampo’s investment, based on its 70% stake, would be £1.16 billion (US$1.5 billion). Sampo expects to fund its part of the acquisition with approximately €1 billion (US$1.2 billion) of newly issued hybrid Tier 2 capital with the residual coming from existing cash resources.
Sampo’s Strategic Rationale
Sampo has a strategic ambition to expand into non-life insurance and beyond its current footprint in the Nordic markets. The UK, which is one of the largest retail P&C markets in Europe, “offers an attractive scale opportunity,” said Sampo in a statement.
Hastings is a leading motor insurer in the UK and recently has been diversifying into other non-life insurance products, including home insurance, explained Sampo. Both motor and home insurance represent large markets in the UK with growth potential for the Hastings business.
In addition, the acquisition of Hastings “provides an attractively positioned platform in one of the most digitally advanced markets globally,” said the company, noting that the UK market has high levels of digital distribution.
“Sampo believes that, under its ownership together with that of RMI, Hastings will be able to further develop its agile and digital business model to create long-term value,” it continued.
Sampo and RMI intend for Hastings to continue to be operated on a standalone but unlisted basis. As a private company, Sampo believes Hastings will benefit from a more long-term approach to decision making.
The independent directors of Hastings intend to recommend unanimously that Hastings’ shareholders approve the offer. It is expected that Hastings’ shareholder meeting to approve the scheme will take place before the end of September 2020.
Sampo and RMI expect all other conditions and regulatory approvals to be satisfied, and the scheme to become effective, by year-end.
Founded in 1996, Hastings is one of the leading property and casualty insurance (P&C) providers in the UK market, offering products and services to UK car, bike, van and home insurance customers. It has approximately 3 million live customer policies and employs more than 3,500 colleagues at sites in Bexhill, Leicester, Gibraltar and London.
Hastings operates as an insurance provider with two separate businesses. Hastings’ retail business, Hastings Insurance Services Ltd., is responsible for product design, pricing, fraud management, distribution and management of the underlying customer relationships. Hastings’ Gibraltar-based underwriting business, Advantage Insurance Co. Ltd., undertakes risk selection, underlying technical pricing, reserving and claims handling. Around 90% of policies are directly underwritten by Advantage.
J.P. Morgan Securities Plc is acting as financial adviser to Sampo and RMI in connection with the offer, while Allen & Overy LLP is acting as their legal adviser.
J.P. Morgan Securities Plc and Nordea Bank Abp will serve as joint lead managers for Sampo’s hybrid T2 bond issue.
Source: Sampo and Hastings
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