HELSINKI (Reuters) - British motor insurer Hastings HSTG.L has agreed to be bought by Finland's Sampo SAMPO.HE and South Africa's Rand Merchant Investment (RMI) RMIJ.J in a cash deal valuing it at 1.66 billion pounds ($2.2 billion), the insurers said on Wednesday.
The recommended offer gives 250 pence a share to Hastings’ investors plus an interim dividend of 4.5p a share, a higher premium than expected after the companies said last week they were in talks.
Hastings shares, which had already soared 27% since the talks were disclosed, were up another 18% at 253p by 1242 GMT, topping the FTSE 250 midcap gainers and scaling a near two-year high.
RMI dipped 1%, while Sampo stock was down 4.1% due to the 47.1% premium paid over Hastings’ July 28 closing share price, which Reuters Breakingviews said looked chunky given few cost savings on offer.
Sampo has been looking to expand into non-life insurance and beyond Nordic markets. It trimmed its stake in regional bank Nordea NDAFI.HE last year, freeing up 1.2 billion euros ($1.4 billion), which will help finance the Hastings investment.
With nearly 3 million live customer policies and an 8.1% share of the highly-competitive UK motor insurance market, Hastings aims to be one of the country's top motor insurers alongside the likes of Direct Line DLGD.L and Admiral ADML.L, Hastings boss Toby van der Meer told Reuters.
Sampo CEO Torbjorn Magnusson added that there were also opportunities for Hastings to expand beyond motor insurance.
“The digital distribution part of the UK market is still growing and Hastings has not yet to any significant degree grown in home insurance,” he said.
Analysts at KBW said the appeal of Hastings lay in its knowledge of pricing systems for motor insurance policies.
“(The) driving force behind the acquisition is the potential upside coming from the technological know-how the UK insurer can bring to the table,” they said.
Once the deal goes through, Sampo will hold 70% of Hastings, while Main Street, an entity owned by RMI and its unit OUTsurance, will hold a 30% stake, a marginal increase on RMI’s 29.7% stake in Hastings it has owned since 2017.
Van der Meer added that Hastings will be run as a privately-held independent company, separate from Sampo and RMI.
When questioned about any potential changes to top management, he said: “I don’t think so.”
Hastings also reported a 31% jump in first-half adjusted operating profit to 78.3 million pounds, driven by strong policy growth and a fall in motor claims as Britons drove less due to coronavirus restrictions.
That chimes with results from Direct Line DLGD.L earlier this week, when the company hiked its interim payout and set a special dividend.
J.P. Morgan Cazenove is acting as financial adviser for Sampo and RMI, while Barclays, Fenchurch and Numis advised Hastings.
Graphic: Hastings vs peers -
Reporting by Anne Kauranen, Muvija M and Carolyn Cohn; Editing by David Holmes and Kirsten Donovan
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