RSA takeover hopes ended by explosion at North Eastern China port as rival Zurich scraps deal

RSA Boss Stephen Hester will miss out on a potential bonanza of £8.5m to leave the company

RSA Boss Stephen Hester will miss out on a potential bonanza of £8.5m to leave the company

An explosion at a port in North Eastern China has derailed a £5.6billion takeover bid for struggling RSA – and scuppered a potential £8.5million bonanza for its chief executive Stephen Hester.

More than £1billion was wiped off the value of RSA as Swiss rival Zurich said it had ditched plans to buy the British insurance giant.

The announcement came as Zurich issued a profits warning and revealed its general insurance division is likely to slump £130million into the red in the third quarter. 

It said it expected to lose around £177million as a result of explosions at a container storage station in the Port of Tianjin in China last month. More than 170 people died in the disaster.

Zurich added that disappointing performance in its general insurance arm in the first half of the year was likely to continue in the third quarter.

The firm said its new general insurance boss Kristof Terryn would launch an ‘in- depth’ review of the ailing business.

Confirming it had ‘terminated’ discussions with RSA, it said its ‘focus instead will be on taking the necessary actions to deliver on the required performance of the General Insurance business.’

The announcement spooked RSA’s investors, with shares falling more than a fifth to 403.3p. The share price soared 18 per cent on July 27 when Zurich confirmed a possible bid.

Having announced a £5.6billion or 550p per share offer on August 25 it has been combing through RSA’s books in recent weeks – a process known as ‘due diligence’.

RSA yesterday stressed that Zurich had not found anything untoward ‘that would have prevented them from proceeding with the transaction on the terms announced on August 25, 2015’.

But the collapse of the deal is a blow to investors who had been looking forward to a handsome windfall. It also means Hester will miss out on a potential bonanza of £8.5m to leave the company.

He had 1.36million shares worth £7.5million from performance related bonuses that were likely to pay out if the deal went ahead.

He would also have collected his £950,000 salary and could have received a bonus worth a similar amount.

Under his watch the insurer, best known for owning More Than, has returned to profit and resumed paying dividends.

Analysts downgraded their recommendations on RSA shares, with broker Panmure Gordon recommending investors sell their shares instead of holding them.

 

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