Specialist insurer Beazley has rebuffed a £7.7 billion takeover approach from Swiss rival Zurich Insurance, revealing it is lower than a previously-rejected proposal made by the suitor last June.
Zurich’s latest offer saw it table a potential offer of £12.80 a share, up from an earlier and previously undisclosed approach for £12.30 a share on January 4, which was rejected.
But FTSE 100 listed Beazley said the latest approach was unanimously rejected by the board “on the basis that it materially undervalues Beazley and its longer-term prospects as an independent company”.
It also said the proposal is lower than an approach made by Zurich late last June for £13.15 a share, valuing Beazley at £8.4 billion, which was also rejected.
Beazley said: “The board received three proposals from Zurich in June last year and engaged with Zurich appropriately, including providing Zurich with certain limited due diligence information in a good faith effort to come to a shared understanding of value.
“The terms of Zurich’s latest proposal are below the last proposal put forward by Zurich in late June last year and rejected by Beazley.”
“The board is very confident in Beazley’s standalone prospects as a publicly listed company and in the attractiveness of Beazley’s business model fundamentals and believes that Beazley is uniquely positioned within the global insurance market to maximise long-term shareholder value and realise the full potential of its specialty platform,” it added.
Shares in the Lloyd’s of London insurer soared to an all-time high after news of the Zurich proposal.
Zurich said its latest approach marked a 56% premium on the value of Beazley shares on January 16, before the proposal was made public.
It said it believes the potential offer “provides Beazley shareholders immediate and certain cash value for their investment at a level that exceeds what Beazley could achieve over a reasonable timeframe through the execution of its strategy”.
Zurich added: “The transaction would create a global leader in specialty insurance with around 15 billion US dollars (£11.2 billion) of gross written premiums, exceptional data availability and underwriting expertise, leading market and distribution capabilities and outstanding reinsurance and technology infrastructures.
“This combination of two highly complementary businesses would establish a leading global specialty platform, based in the UK which would also leverage Beazley’s Lloyd’s of London presence.”
Zurich said it would fund the deal through existing cash and debt facilities, with the remainder through an equity placing.
It has until February 16 to either make a formal offer to buy Beazley or walk away under UK Takeover Panel rules.
Panmure Liberum analyst Abid Hussain said Zurich has scope to increase its bid.
He said: “We would expect significant expense and capital synergies should the deal go ahead, meaning there is room for Zurich to pay more.
“Moreover, Beazley has demonstrated itself to be an excellent manager of risk and has exposure in key structural growth areas.”
Zurich has more than 63,000 employees and is headquartered in Switzerland.
Beazley is a specialist insurer, with a burgeoning cyber cover offering, as well as cover across professional indemnity, property, marine, reinsurance, accident and life, and political risks and contingency business.
