Insurer RSA is backing a £7.2 billion cash offer from Canada's Intact Financial and Denmark's Tryg in one of Europe's biggest financial takeover bids this year.
Insurers have become an attractive proposition since the coronavirus crisis despite reputational damage from disputes over business interruption claims, industry sources say.
Home-working has led to fewer claims on home and motor insurance while commercial insurance rates have risen sharply.
RSA's directors backed the Intact-Tryg bid unanimously and recommended that shareholders vote in favour of the consortium's offer, the company said today, having first flagged the approach early this month.
RSA provides home, motor and commercial insurance in the UK and also has large operations in Ireland, Canada and Scandinavia.
If successful, the suitors would carve up RSA between them, the British group said. Intact would gain RSA's Canada, Irish, UK and international operations while Tryg would take its Sweden and Norway businesses. The pair would also co-own RSA's Danish unit.
Tryg would pay £4.2 billion while Intact would contribute £3 billion, with the overall offer representing a 51% premium to RSA's November 4 closing share price of 460 pence.
"Our deep knowledge of these markets makes us ideally placed to integrate, operate and enhance the value of our combined group," Tryg's CEO Morten Hubbe said in a statement.
KBW analysts described the deal as "transformational" for Tryg.
Activist investor Cevian Capital, RSA's largest shareholder, said it fully supports the takeover.
"We assess that the long-term competitiveness of RSA's business will benefit from combining with Tryg and Intact, the best-performing non-life companies in their respective geographies," said Christer Gardell, co-founder of Cevian, which owns a 14.9% stake in RSA.
Gardell added that RSA chief executive Stephen Hester - a former NatWest boss - had put the insurer on a better footing.
Since joining in 2014, Hester has shored up RSA's balance sheet with a £773m rights issue and scaled back underperforming operations.
Industry sources said RSA had been seeking a buyer since a £5.6 billion bid from Zurich Insurance collapsed in 2015.
However, the appetite for deals has been growing across the sector. In August motor insurer Hastings agreed to be bought by Finland's Sampo and South Africa's Rand Merchant Investment.
