Zurich Insurance made a friendly 5.6 billion pound ($8.8 billion) take-over proposal for British rival RSA on Tuesday, paving the way for one of Europe's biggest insurance deals. Zurich said a month ago it was weighing a bid but left it to the last day under British take-over rules to unveil a cash offer of 550 pence per share, roughly in the middle of the price range expected by investors in Zurich and RSA.
RSA said it planned to recommend the proposal to its board and gave Zurich another four weeks to come up with a firm take-over offer, though the Swiss insurance company reserved the right to ultimately bid below 550 pence per share. Tighter European capital regulations due to come into force in January 2016, strong competition in the insurance sector and low investment returns have encouraged several insurance mergers and more are expected in Europe and the United States. The deal is similar in size to Aviva's agreed take-over this year of rival UK insurer Friends Life and would beat Exor's $7 billion purchase of Partner Re. Analysts say a merger could offer operating efficiencies for Zurich, which like RSA has a large presence in Britain, and also provide the Swiss insurer with better access to Canada, Scandinavia and Latin America, where RSA has a strong presence.